Building Your Budget
Creating a budget is one of the first steps toward taking control of your financial future. It’s a plan for how you’re going to get and use your money. Creating your personal monthly budget will show exactly where your money’s coming from and where you’re spending it. Being on a budget doesn’t mean that you can’t spend money. It means that you plan for your expenditures so that you can afford the stuff of everyday life. It means that you pay for the necessities first and the extras second. It means that those expenses that you know will come up like new eyeglasses or auto repairs will be planned for, and they won’t put you in debt when it comes time to pay for them.
Budgeting is one of the best ways to manage your money wisely but people are often unsure on how to go about setting one up. Creating a budget is actually pretty easy and should include the following.
Income – To create your budget you will need to make an estimate of your income for the month. For example, the money you regularly earn from wages, salary, and interest from bank accounts. Add it up and that’s your monthly income.
Expenses – Figure up the money you regularly spend. Start with “fixed expenses.” These are true necessities that allow little or no room for cutting back, such as rent, utilities, and transportation. Next, look at your “variable expenses”. These are the expenses that fluctuate each month and might include food, clothing, and entertainment.
Savings – Make sure to budget some money for savings, even if it’s only a small amount each month. Aside from staying out of debt, the most important purpose of budgeting is to save so you can obtain financial freedom. Your budget will also show you where you might be able to cut your spending and save even more.
Disposable Income – What you’re left with once you subtract your expenses and savings from your income is the money you can use to spend on other nonessential things.
Sticking to the budget might be the hardest part. Creating and sticking to your own personal budget may seem like a lot of work, but it’s worth it. Establishing a budget is crucial for your financial health, but it doesn’t end there. Make sure that each month you take the time to monitor and adjust your budget as needed. Finding the right balance and working out the right budget will always take some fine tuning. If you find some modifications need to be made, make the adjustments and implement them the following month. It often takes multiple revisions before you achieve a budget that you can really stick to. Don’t give up. The bulk of budgeting’s pains are at the beginning and once you get in the habit of maintaining a budget, you’ll find that it gets easier with time. Possibly best of all, knowing the state of your finances will help give you peace of mind and a better outlook of your future. Good luck and happy budgeting!