It is important that one to know how to manage their money, but understandably, it can be quite a daunting task! Learning how to create a budget doesn’t have to be complicated though. Below are some tips to help you create a budget and stick to it once and for all!
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According to payoff.com, your first order of business when you create a budget should be to calculate your expenses. You can figure this out by looking at bank statements and receipts. To get a more accurate estimate of your spending, look at your statements and receipts from the past 6-12 months.
After adding everything up, divide by the number of months to find out your average monthly spending. Payoff.com also notes that a good rule of thumb is to add 10 to 15 percent to your estimated spending.
After determining your average monthly spending, figure out your income. Make sure you account for your regular salary as well as any other outside sources of income (ex: side business, garage sales, etc.).6 Steps To Create A Budget And Stick To It Once And For All Click To Tweet
The next step is to set savings goals as well as goals for paying off debts. First, subtract your expenses from your income to see if you have a budget “shortfall” or a budget “overage”. If you are making more money than you’re spending, this is great! On the other hand, if you are spending more than you’re making, determine where you can make some cuts. Things like buying coffee from Starbucks, manicures, or impulse purchases from Amazon can really add up!
We all need food, shelter, and water, so these should come first on your budget! One way to save money on food is to plan out meals and limit eating out. Bringing a lunch and snacks to school or work makes it easier to restrain from running to the local convenient store for a snack. Another way to save money on water is to get a reusable water bottle. Not only will you be saving money, you’ll also be helping out the planet.
For example, for some people it isn’t necessary to own a car because public transportation is easily accessible. That doesn’t mean that this person doesn’t want a car, but due to their budget they may have to resort to walking, biking, or public transportation for the time being.
Luxuries can range from that really cool vintage T-shirt to a vacation in the Bahamas. It is important to make sure that all of your other needs are taken care of before spending money on these types of things.
And there you have it! Simple steps to consider when creating a realistic budget. Happy saving!