Budgeting Tips

Hello! If you are reading this hopefully it means you decided to make a budget. So let’s jump right in and go over some tips to making a budget.

A budget is simply a list of your income and expenses. It is easiest to make the budget on a monthly basis. The goal is to spend less than you make, with the excess going to savings.

To start your budget you will need to do some research. First you will need your net income (your pay after taxes and deductions aka the money that hits your bank account).

Next you will need an estimate on your expenses for the month. Some expenses, like rent, are a fixed amount each month, so finding that number is easy. For others the amount fluctuates. I suggest pulling your last three months of expenses and using that data to calculate a monthly average. Fortunately banks and credit card companies keep track of that spending activity and it can be easily accessed online.

While this might take a little while, this step is extremely helpful because it gives you an accurate amount of how much you spend. If you budget only $50 to eating out each month but are actually spending $150 your budget is going to get blown up in the first month. The better your data, the better your results.

List out all your monthly expenses and compare it to your income. You might find that you are spending more than you are making. In this case you need to examine your expenses and determine where you can make cuts.

If your income and expenses are equal, you still need to make cuts. That is because you want to have some money that is being saved each month.

Eventually you should come to a point where you have the finalized list of your income and estimated expenses and savings. Now you get to see how well you stick to your budget. By tracking your expenses you can see how accurate your estimated expenses are. A budget should be fluid. If there is a category you are constantly spending more you can make cuts in other categories to even things out.

Tracking your expenses might sound like a lot of work, but as mentioned in another post this only takes me about ten minutes a work. Also, there are free tools out there like Mint that will track things for you.

I would suggest using either Excel or Google Sheets for your budget. I personally use Google Sheets.

As mentioned earlier, a budget should be fluid. I would suggest revisiting your budget and making revisions when needed. You could make changes annually or when major changes to your income (new job/promotion) or expenses (house/new car) occur.

Here are some more resources that give more in-depth information on budgeting:

https://www.daveramsey.com/get-started/budget

https://www.thebalance.com/how-to-make-a-budget-1289587

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