Many people, at the end of the month wonder where their money went. Almost as though it vanished into thin air. This is mainly as a result of not planning how to use their money.
Budgeting is telling your money where it should go, rather than wondering where it went. Making you the master and not your money. If you’re planning to go on vacation, buy that latest car, or pay for other bills, a budget is the first step towards making your goals a reality.
Follow these proven steps for creating a realistic budget.
Determine Your Net Income
The first step in creating a budget is to find out or identify how much money you get. Care should be taken not to assume that the money you receive monthly is the money you actually have at your disposal. Your actual money is what is left after all deductions like taxes and social security have been made. What is left after all the deductions has been made, is what is called your net salary, and the number you should use in making your budget.
Keep track of Your spending
Keeping track of your spending is very helpful in many ways. It helps you determine what you spend money more or less on, and how you can can make informed adjustments to your spending. Some expenses can’t be adjusted because they are fixed. Rent, car payment, electricity bills etc are all fixed expenses.
Some expenses however are not fixed and necessary adjustments and cut backs can be made. Food, partying, fuel etc can all be adjusted for maximum and efficient spending because they are not fixed.
List all these expenses and determine what adjustments if any, you can make to them. Make sure to put down all your daily expenditures.
Make Your Goals Clear
When creating a budget, it is important you keep in mind what your goals are. Both long term and short term goals must be made clear. For example, if you want to get out of debt in the short term, then it will be prudent that you cut down on your expenses so that you can soon accomplish your short term goal of getting out of debt.
You can get an idea of what you’ll be spending in the month using the expenses you determined. Use that as a guide to determine how much you should budget towards each expense. Prioritize your expenses and make sure to adjust to meet your more pressing expenses. Expenses which are not needs, for instance going to the movies can be cut down.
It is very important that you regularly review your budgets to make sure that you are staying on track. You may have to to make some adjustments to your budget for reasons such as increased pay or increased expense or even a steep decrease in your income. Whatever be the case, follow the steps outlined above if you want to make any changes to your budget.