Budgeting can be a challenging process that necessitates discipline and self-control, but it’s an indispensable tool for managing money. Budgeting also gives you control of your financial future – whether that means paying off debt, saving for an emergency or investing in the long run.
How to Create a Budget
Before you do anything else, figure out how much money is available for expenses. That includes your regular pay as well as any income from side hustles, full or part-time jobs and any other sources that come in on a monthly basis. Calculate your net income which is earnings minus taxes and employer-provided programs like health insurance or retirement savings.
Once you have a good number, it’s time to assess your spending habits and identify areas for improvement. Keeping a daily journal or using an app that tracks expenses will help keep you more aware of your budget, allowing for easy identification of areas where savings could be made.
The Consumer Financial Protection Bureau (CFPB) offers a spending tracker online, but you can also use credit card statements and store receipts to monitor where money goes. Doing this gives an indication of where adjustments need to be made in your budget as well as helps prioritize fixed and variable expenses so you can find ways to save or spend less in those categories.
Step 3: Construct a Budget Worksheet
Once you know how much money is available to spend, create your budget. This can be as straightforward or complex as desired; the important part is getting control of all expenses – both fixed costs (mortgage, rent, utilities and insurance) and variable ones like entertainment or dining out.
Keep in mind that monthly expenses can differ from month to month, so it’s wise to plan ahead for major costs such as annual car registration renewal, tax bills and home maintenance. Furthermore, setting up automatic payments for any recurring or monthly obligations you owe can help ensure timely payment.
Budget spreadsheet templates for 2019 can be found online, or you can start from scratch using either pen and paper or a personal finance app. Before selecting the right budget for your goals, it’s wise to experiment with various tools and see which ones work best for you.
Step 4: Monitor Your Transactions
The next step is to monitor your spending over a month and identify any areas where you fall short. That may involve making adjustments in certain categories, like cutting back on coffee purchases or setting aside an extra dollar towards paying off debt each month.
It may also involve creating a new category in your budget, such as miscellaneous or fun money, that can be used for covering unexpected expenses. You might even decide to allocate that money towards an specific purpose like paying down debt or saving up for a vacation.
