In many ways, budgeting is the roadmap of your finances. After all, moving in the right direction is easy, but it doesn’t necessarily get you to where you think you’re going. It’s important to set aside enough money for bills and still save a little for that proverbial rainy day. Start by simply tracking your monthly spending and then write up a plan and stick to it. Remember that monthly budgets do not need to be complicated; they just need to be something you can follow as a guide. Don’t lose sight of your goal; spend what you need, save what you can.
Information you will need to start a simple budget.
- Determine your income.
- All sources of monthly income (amount of your take-home pay, or net pay)
- Determine your expenses.
- Track all your expenses for three months to determine where your money is going.
- Begin to categorize your expenses into 3-5 categories, this is your choice.
- Fixed expenses
- Examples: rent, mortgage, auto loan payment, etc.
- Variable expenses
- Examples: food, clothing, entertainment, etc.
- Unplanned expenses
- Examples: medical costs, auto repairs, home repairs, etc.
- Savings goal(s)
- You always want to pay yourself when establishing your budget.
There is no right or wrong way to create a budget. Just remember that a budget is your personalized spending plan that needs to work for your situation. Find one that works for you and do your best to stick with it.