When it comes to organizing your finances, creating a budget is a great start. A budget can help you to save money to go on a vacation, pay your bills and help you to achieve all of your financial goals. So, once you’re ready to create a budget, be sure to follow the steps below.
1. Income
The very first thing you need to do is look at exactly how much money you earn every month, particularly after tax. In the event that you have a different income every month, simply use an average. However, it is best to ensure this number is as accurate as possible. Be sure to include all of your sources of income such as rental income, child support, dividends, alimony and more. Once you have a solid grasp on your monthly income, you can then look at your spending.
2. Figure Out How Much You Are Spending
In order to start calculating your expenses, it may be useful to create different buckets where you spend your money. Some of these may include housing, food, utility bills, medication etc. One you have the main buckets down, you can then add on extra buckets such as vacation, clothes and accessories, eating out etc. Be sure to look at our free downloadable Payoff Budget document. Of course, you can make your own budget. It is important to remember that there would be expenses that don’t occur every month. So make sure to look at how much you’ve spent over the last months so that you have a clearer idea on how much you spend every month.
3. Look At The Difference
In the event that you have more expenses in comparison to savings, then you would have two main options. You can either generate a higher income or you can find a way to spend less money every month. In most cases it is a lot simpler to lower your spending as opposed to earning additional money. So, take a close look at your budget and find areas where you can lower your spending. For example, you can opt to buy less clothes, eat out less etc. If you are actually saving more money than you spend, then that is fantastic. However, if you want to save even more money, then you should look at other ways to reduce your spending. If you find yourself with a financial emergency like unexpected car maintenance you can consider an online cash advance.
4. Have A Plan For Your Savings
Having savings is great, however, you may be wondering what you should do with these savings. In the event that you have debt that is high interest, then you should definitely work to eliminate that. One option is to consolidate your debt at a reduced interest rate that will allow you to keep more of your money. You should aim to pay off this debt as quickly as possible. To start with, you should strive to create a savings of £1,000 and then try to save even more so that you create an emergency fund that can fund your expenses for at least 3 months. Alternatively, you can try to save a percentage of your overall income such as 5 – 10% every month.
5. Make Budgeting A Habit
Lastly, once you have created a budget, you should do your best to stick with it. You should review your budget every week so that you can always have a good idea of your income and spending. This will help you to determine what changes you need to make and ensure that you keep striving towards your goals.