Budgeting creates the groundwork for every financial plan. A budget is an estimation of income and expenses over a specified period of time. A budget serves as a plan of action for achieving your goals. Learn more about budgeting.
Smart Spending: Budgeting 101
Collect every financial statement you can.
This will include revenue and expenses and may comprise of bank statements, credit card statements, bills, paychecks, and more. The more you can find, the more accurate your budget will be.
Take note of all sources of income.
Include any and all income. All paycheck amounts will be post-tax removal and calculated monthly.
Create two lists of monthly expenses, fixed and variable.
Your fixed expenses will be those that remain the same each month (ie. Rent, car payments, tv/internet bill). These expenses are likely requirements of your way of living. Variable expenses will include things such as eating out, groceries, gas, etc. The expenses may be necessities; however, they will change in dollar amount each month.
Do the math.
Calculate the difference in income and expenses. If you have more income than expenses, you’re doing good. If the expenses are higher, you will need to make some changes.
Adjust your spending.
Evaluate your variable expenses and find places to cut back. It should be easy to shave a few dollars here and there to make ends meet.
Review your budget regularly.
Be sure to review your budget once a month to ensure you are staying on track.