A budget of your income and expenses is important to create so that you have enough money to pay your bills and obtain the necessities that you need to survive each month. Budgeting is also useful for when youโre saving to purchase something or when youโre running a business. But to be successful at budgeting, you must be realistic and practical.
Below are tips for helping you create a budget.
1) Add Up All Expenses
The most important part of creating a budget is adding up all the expenses that you have per month. Gather all your bill statements, bank statements, check copies, receipts, financial documents, and so on. Once you know how much your total expenses are each month, you will know how much you will need in income to satisfy those expenses. If you can, try to eliminate things that you want so that your expenses are only made up of things that you need.
2) Add Up all Income
In most cases, a personโs income is going to come from their job. They likely receive a paycheck every week or two and that is it. These paychecks add up to what their total monthly income is going to be. This is the information you would put on your budget. Of course, if you have any additional income like freelancing work or royalties, then put that income down as well.
3) Set Goals and No Extras
Set a goal for how much you want to save or how much debt you want to pay off per month. It is important to set goals when youโre budgeting because it will ensure that you donโt spend money on things you donโt need. For example, if you spontaneously decide to go to a drive-thru restaurant and purchase a quick meal for $7, that is an extra $7 expense which was not included in your budget. Every dollar of your budget needs to be accounted for. There is no room to purchase any extras.
4) Record Everything
There are unexpected expenses that come up in life that we donโt budget for. Perhaps your car gets a flat tire and you need to purchase a new one. Maybe you have medical issues that you werenโt expecting and are now costing some money. Whatever your expenses are, you need to record them in your budget book. Then, you can adjust your budgeting in future months to work toward paying off the extra debt you accumulated from these unexpected expenses.
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