Knowing how to handle your money with a budget is one of the best things you can do for your finances. A budget allows you to control every aspect of where your money goes. The problem for most people is that they do not know exactly what they need to do to budget their money. Little do they know that a budget is a very easy thing to do. Just follow these steps.
-Know Your Income
The first thing you need to find out is how much money you have coming in every month after tax. This includes your regular pay check, plus any income you have coming in from other income streams, like odd jobs or investments dividends. Many times, there are other sources of revenue that you wouldn’t normally think of. Knowing your income will help you keep from overspending. If you do not know how much you make, you will inevitably overspend.
-Know your Expenses
The next thing you need to do is find all of your expenses. Collect up every bill, payment, and receipt you can find. If you normally spend money on it, it is going to go in the budget.
Also, do not forget about expenses that are not regular, like car maintenance, Christmas presents and taxes. If you have an idea of how much money you spend on that item every year, divide that amount by twelve and that is how much to budget.
Knowing how much money you are spending every month is one of the most important parts of a budget. If you do not know how much you spend, then you can not control your finances. So find out exactly how much money is going out of your household every month.
-Put it On Paper
Now that you have all of your income and expenses together, it is time to put it down on paper. This is needed to keep all of the information you collected together and easy to access. Writing all of your income and expenses down will help you stick to your budget much easier.
Here is what you need to do. At the top of the page write all of your sources of income and then give the total just below the list. Then, below your income total, list all of your expense and total it below that list. The difference between your income and your expenses is your discretionary income.
-Delegate your Discretionary Income
Now take your discretionary income and decide what you would like to do with it. Invest for retirement, save for a new car, or save for something that you really want. Whatever you do with it, just make sure to write how much of that money will go to what. By telling your extra money what to do, you will never be surprised by how much you spend. You will know exactly where your extra money goes every month.
-Stick to it
Now that you have your budget made, the hard part comes. You have to stick to it. There will be times when sticking to the budget will be almost impossible, but that is the exception. If something you were not expecting comes up, take money from another category to pay for it. Then when next month’s budget comes around, just add it to the budget. So as things that you did not think of come up, it is no big deal.
That is it! If you follow these steps you will have created a better budget. Budgeting is the most important financial tool that anyone will have and so it is important to at least know what to do to create one. Though no budget is perfect, a well created budget accounts for almost anything that will come up. Follow these steps to create a monthly budget and you will have put yourself on a path to financial success.