Creating a Budget
A budget is an effective and powerful tool to help you manage your finances. A budget:
Creating a budget isn’t difficult. Follow these three simple steps.
Step 1: Set Your Goals
Ask yourself: What’s important to me? What do I need? What do I want? Once you know what you want, you can begin to budget accordingly.
Step 2: Track Your Income and Expenses
Pull together the records for your household income and expenses. Be thorough and honest when estimating any expenses. Your budget should be an accurate picture of what you spend. But don’t worry if you use estimates for your some parts of your budget. It may take a few months to determine the specifics, particularly for items that don’t occur regularly.
Organize your information in the following categories:
If your bottom line is positive – you have more income than expenses –you can add more to your savings category.
If your bottom line is negative – you have more expenses than income – you are spending more than you earn and probably financing the deficit with credit. If you’re spending more than 15-20% of your take-home pay on repaying debts and credit cards, take a look at your variable expenses and decide how to bring your spending under control.
Step 3: Keep track of expenses
Keep a monthly expense record. Carry a small notebook with you and record all purchases and withdrawals. Many people find they spend hundreds or even thousands of dollars each year on coffee, snacks, magazines, and impulse purchases. The goal of tracking expenses is to understand where you’re spending your money so you can make adjustments.
Follow these tips to help you maintain your budget all year long.