Having a budget does not mean that your money is controlling you. In fact, you are helping to control where your money goes by having a budget. You are making your money work for you. You are giving each dollar that you bring home a place to be. It gives you an opportunity to work towards more financial freedom.
There are many different types of budgets. I am going to share how to make a simple budget with you. All you really need is a pencil and a piece of paper to get started.
- What is a simple budget?
- What is your purpose for a budget?
- Take a look at your current spending habits
- Income
- Fixed monthly expenses
- Non fixed monthly expenses
- Savings
What is a simple budget?
A simple Budget is one where you can track your monthly fixed and nonfixed expenses and allocating money for savings. A positive thing about budgeting is that you don't have to wonder where your money is going. You will be telling it where to go.
There are many different types of budgets that can be made. I am sharing a simple way to budget to help eliminate as much stress that can be associated with budgeting as possible. Once you sit down and choose one that works best for you it does not have to be so stressful.
What is your purpose for a budget?
Having a purpose for a budget for you may make it easier to make one and stick to it. What is your purpose for making a budget? Is it so that you can stop wondering at the end of the month where all of your money went to? Is it so that you can start saving more for your future? Or is it to save for a family vacation?
It can be something big or small. It is not the same for everyone. Decide what your purpose for a budget is.
Take a look at your current spending habits
Be honest with yourself. Think about your current spending habits. Aside from your bills, what are the extras you spend money on each month?
Pull out your receipts and credit card statements. Scour through them to get an idea of what you are spending money on. Tally up the items you see that you are spending on often. An example, are you going shopping and buying extra things often? How much are you spending when you do? Are you going out to eat often? How much are you spending on that? This will give you an idea of over spending you may be doing.
Income
Whether you have one source of income or multiple sources of income in your household, the total that you bring home monthly is your monthly income amount. Remember to include any sources of income that you have. Even if it is a small amount that you are bringing in from a side job for example that you may have. Be sure to include all of that too.
Fixed monthly expenses
Fixed monthly expenses are items that are set each month. For example your mortgage and car payment. The amount stays the same. Expenses such as utility payments are fixed monthly expenses as well. Although their amounts may change from time to time, they are still monthly expenses we have each month. Some other examples of fixed monthly expenses are insurance, phone, and any debt payments you are making.
Non fixed monthly expenses
Non fixed monthly expenses are items that costs vary. Some of these costs you may set at a certain amount, but they can be changed if necessary. There are many items that can fall under this category such as groceries and gas. Extra things such as eating out and extra curricular fees for children's activities can fall under this category as well.
Savings
Sometimes it can feel like there is not enough money after we pay our bills to put anything into savings. When we are taking a look at what our spending habits are we may see where potential money to save is going.
If there is money that you are spending for extra things and cutting that out does not give money left for savings, take a look at your non fixed monthly expenses.
Are you able to cut some costs to save money on your groceries? How about your tv bill? Could you sign up for a less expensive plan? Really look through everything with a fine tooth comb. You may be surprised to find some money that you can start saving.
Conclusion
It is important to have a budget. Having a budget does not mean that you cannot have a say in where your money goes. In fact having a budget gives you the power to tell your money where to go. Choose a way to budget that works best for you and stick to it.
What is your number one tip for budgeting? Please share.
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