A budget is a plan you write down to decide how you will spend and save your money each month. It may feel daunting, but budgeting doesn’t have to be a painful process! Creating and sticking with a realistic budget can help make sure your financial bases are covered, help you steer clear of debt or manage existing debt, and help you stay on track to reach your financial goals.
These important tips can help you evaluate your finances, create a realistic budget and stick with the set budget to reach your financial goals.
The first step you want to take is to identify your net income. Gather all of your financial paperwork and deduct taxes so you know exactly what your take home pay will be.
Next, you want to track your monthly spending. List all of your fixed monthly expenses such as rent or mortgage, utilities, loan payments, etc. Then, also list all of your variable expenses like your groceries, gas, and other common monthly spending.
You will also need to take a thorough look into your discretionary spending on things like clothing, going out to eat, entertainment, fast food, coffee, etc. Discretionary spending is usually the area you need to limit or cut back on to make your budget and savings goals work.
Set your financial goals and create a budget based on your weekly, bi-weekly or monthly schedule. Based on your pay period and monthly bills, create a budget for your fixed and variable monthly expenses, set a limit on your discretionary spending and then set an amount to save or to use to pay down high interest debt.
Once you have everything documented and a general budgeting plan of what you would like to accomplish with your income, you can get a better handle on your financial situation. Stick to your budget and you will know exactly how much money you will be able to save or use to pay down your debt.