Create a BudgetCreating a budget is the best way to control your finances and make sure your money is going towards the expenses that matter the most to you.
Here’s how to get started on creating your personal budget:
- Gather all your financial documents, including bank statements, credit card statements, utility bills, mortgage/rent statements, and any information you have regarding other expenses.
- Record all sources of income as monthly amount.
- Create a list of all your monthly expenses. This includes rent or mortgage, utilities, entertainment, food, loan payments, internet/cable services, and all credit card bills.
- Divide your expenses into two categories: fixed and variable. Fixed expenses are those that stay relatively the same each month and are required parts of your way of living, like rent, utilities and loan payments. Variable expenses are the type that will change from month to month and include items such as groceries, gasoline, entertainment, eating out and gifts, to name a few.
- Total your monthly income and monthly expenses. You goal should be to have more income than your monthly expenses. When you have more income than expenses, it means you can funnel some of that extra income into areas such as retirement savings and paying off credit cards quicker so you avoid accruing interest.
- Make adjustments to your expenses if need be. If you are in a situation where expenses are higher than income, you should look at your variable expenses to find areas to cut. Since these expenses are typically non-essential, it should be easy to shave a few dollars in several areas to bring your expenses closer to your income.
- Review your budget monthly. Keeping on top of your budget will allow you to make sure you are staying on track.