If your income is in the form of a regular paycheck where taxes are automatically deducted, then using the net income or take-home pay amount is fine. If you are self-employed or have outside sources of income, such as child support or Social Security, include these as well. Record this total income as a monthly amount. If you have a variable income for example, from a seasonal or freelance jobconsider using the income from your lowest-earning month in the past year as your baseline income when you set up your budget.
Write down a list of all the expenses you expect to have during a month. This list could include:. Use your bank statements, receipts, and credit card statements from the last three months to identify all your spending. Fixed expenses are those mandatory expenses that you pay the same amount for each time.
If you pay a standard credit card payment, include that amount and any other essential spending that tends to stay the same from month to month. If you plan to save a fixed amount or pay off a certain amount of debt each month, also include savings and debt repayment as fixed expenses. Variable expenses are the type that will change from month to month, such as:.
If you don't have an emergency fund, include a category for "surprise expenses" that might pop up over the month and derail your budget. Start assigning a spending value to each category, beginning with your fixed expenses. Then, estimate how much you'll need to spend per month on variable expenses. If you're not sure how much you spend in each category, review your last two or three months of credit card or bank transactions to make a rough estimate.
If your income is higher than your expenses, you are off to a good start. This extra money means you can put funds towards areas of your budget, such as retirement savings or paying off debt. If your expenses are more than your income, that means you are overspending and need to make some changes. If you're in a situation where expenses are higher than income, find areas in your variable expenses you can cut.
Look for places you can reduce your spending—like eating out less—or eliminate a category—like canceling your gym membership. If your expenses are far above your income, or you have significant debt, reducing your variable expenses may not be enough. You may need to trim your fixed expenses and increase your income to balance your budget. Aim to have your income and expense columns to be equal.
This equal balance means all of your income is accounted for and budgeted toward a specific expense or savings goal. After you have set up your budget, you must monitor and continue to track your expenses in each category, ideally every day of the month. The same budgeting spreadsheet or app used to make your budget can also be used to record your expense and income totals.
Recording what you spend throughout the month will keep you from overspending and help you identify unnecessary expenses or problematic spending patterns. Put some money from each paycheck into savings. It can seem hard to save when you're on a budget, but Budge (Live) a little money put aside for emergencies or unforeseen expenses can be a life-saver when you need it. When you're planning out your budget, make it a priority to put even a little money into savings every time you get paid.
Even if it doesn't seem like much, it will start to add up quickly! Once that begins to feel comfortable, challenge yourself to increase the amount, if you're able. Eventually, you should try to have about 3—6 months' worth of expenses saved in case you find yourself unable to work. Try the envelope method to help organize your cash. If you mostly use cash to pay for things, it can be hard sometimes to keep up with where it goes.
One way to help keep your cash spending on track is to divide your money into different envelopes. Label each envelope with what the money's for, and only spend what you have set aside. Don't borrow from other envelopes if you overspend, or else you could run short in another category at the end of the month. Write down your bills in a calendar to help pay them Budge (Live) time. Get a calendar, planner, or app that will help you keep track of each bill you owe each Budge (Live), as well as their due dates.
That way, you won't accidentally forget to pay a bill, which can cost you extra money in late fees and other penalties. They can lower your credit score, meaning you'll get higher interest rates on things like a car loan or mortgage—and a higher interest rate means higher monthly Budge (Live).
Method 2. Learn to say no and avoid temptations. These days, there are endless opportunities to spend money. If you want to successfully stick to a budget, it will take self-discipline and willpower.
It won't always be easy, but try to keep your goals in mind when you're tempted to buy something you don't really need. Also, get in the habit of occasionally turning down invitations from friends, especially if you tend to spend a lot of money while you're out.
If you tend to shop online, try unsubscribing from promotional emails so you won't feel like you're missing out. When you do go out, bring cash, and only what you can afford to spend. Try repeating a mantra when you're tempted to spend. For instance, if you're saving for a trip, your mantra might be, "Beach vacation! Transfer money to your savings automatically. Each week, have a certain amount transferred from your paycheck directly into a separate savings account. It's a lot easier to Budge (Live) money if you don't actually see it first.
If you get paid in cash, get in the habit of taking out your savings as soon as you get paid—preferably before you spend anything else. Set financial challenges for yourself. If you want to manage your money a little better, try creating a personal challenge, like bringing your lunch to work for 30 days or not buying any new clothes for 3 months. Sometimes you just need an extra push to change your habits.
Avoid using credit cards unless you can pay them off. When you buy something on a credit card, you generally aren't charged interest if you pay off the whole balance each month. However, if you only pay the minimum amount due, you'll continue being charged interest every month until the balance is gone. If you have trouble controlling your spending, it's probably best to avoid them altogether. Keep trying, even if you mess up. While it's important to be financially responsible, it's also important not to beat yourself up if you spend a little too much money here and there.
Even if you've made big money mistakes in the past, try to keep your attention focused on the future, and keep putting one foot in front of the other until you hit your goals. Sometimes, this can even be a sign that you need to change your budget, rather than your spending, so keep evaluating and adjusting your finances every month.
Method 3. Comparison shop before you make a purchase. The internet makes it incredibly easy to see prices for the same item across different stores, so you can always get the best deal. You can comparison shop for everything from groceries and school supplies to your cell phone plan or car loan, so take advantage of the resources you have available to ensure you don't overspend. Cook at home for most of your meals. Even if you don't think you eat out very often, you may be spending a lot more money than you realize on things like fast food and snacks from the convenience store.
To help avoid that, plan out your meals ahead of time, and pick up groceries about once a week with everything you'll need for each meal. If you find a good deal on meat or produce, buy extra and freeze some to use later. Dress up cheap ingredients to make them more exciting!
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