Budgeting may have the impression of being useful for only one type of financial situation, but budgeting can be beneficial for everyone’s financial future. There is no one way to budget, as everyone’s ideal budget will be based off of their unique financial situation.
While it can seem like a daunting task, creating a budget that is suited to your income is a lot easier than you may have initially thought! With the right tools and resources, creating your budget becomes much simpler.
1] Figure Out Your “Why”
The most important part of your budget is to determine why you need to create one. Your reason “why” is the main financial goal you should strive to achieve. Your reason for taking back control of your finances is important for your future financial well being!
Some common goals that budgeters focus on include.
- Saving for a House.
- Paying Off Title Loans.
- Repaying Student Loans.
- Saving for Retirement.
- Getting Out of Debt.
- Creating an Emergency Fund.
Regardless of what your personal financial goals are, creating them can help you start your progress towards achieving them. Having a budget plan may also keep you motivated to pay off your bills and save money.
2] Determine Your Income and Expenses
In order to create your ideal budget, you’ll need to determine your monthly income and plan your expenses.
In order to determine your income, you’ll need to include a few different factors.
- Child Support.
- Residual Income.
After determining a more accurate calculation of what your income will look like during the month, it’s time to estimate your expenses. Start first with whatever fixed expenses you may have.
These costs generally include items like your mortgage payment or debt payments that do not change each month. These expenses are generally those that are the highest priority.
Additionally, you will have variable expenses, which are expenditures that change throughout the month. These are usually items such as groceries, entertainment, takeout, and transportation costs.
3] Create Your Budget
After you have your income and expenses determined, creating your budget is easy. With a bank statement and credit card statement in hand, separate your expenses into two different categories: fixed and variable.
This can give you an idea of how much you are spending throughout the month and if you are spending outside of your means. Your expenses should not exceed your income, as you will still need to put some of your income into your savings.
4] Stay on Track
Creating a budget is one thing, but sticking to it is another! One trick to stay on track of your budget is to keep it with you. Whether you prefer a physical ledger or an app on your phone, updating your budget daily can be a way to hold yourself accountable and keep your budget successful.
5] Leave Some Wiggle Room
You can keep yourself motivated by allowing yourself a little bit of wiggle room in your budget. This can mean keeping an emergency fund to allow yourself some flexibility if any unexpected expenses come your way.