Creating A Budget Step By Step

Too often you land yourself into a monetary fix by not watching your finances closely. If you have found yourself in a similar position time and again, it is time you started learning how to budget money. While creating a budget may sound like a boring task and something you wouldn’t want to delve into, it actually is a necessary step for you to keep your finance in order. With the following steps, creating a budget becomes a fairly easy task and it will work wonders for your financial life if you follow it, honest to the core.

How To Budget Money

1. Record your monthly expenses

Know where your money is going. Most people make the mistake of spending without recording. The wise thing to do would be to collect records of all your expenses through debit card, credit card and other means of transaction. Don’t leave even the minor cash purchases. This way, you get a clearer view of where exactly your money is going. You will also spot the areas where you can cut back.

1. Calculate your monthly income

The next thing to do is to calculate your total monthly income. Whether you are working one, two or more jobs, total the money you are bringing in. Record all sources of your income and list a total monthly income.

1. Total and compare

Now, total your monthly expenses and income. If your expense exceeds your income, you know it’s not a good place to be in. You will definitely need to make some changes and cut back on unnecessary spending. If it’s the opposite then you are in a better place, financially. You can use the excess amount to save up for the future or if you have debts, then to clear it.

1. Make necessary changes

The main goal behind making a budget is to balance out your spending to income. If your expense is more than your income, you need to make some changes. Look at your expense list; see where you can cut back. Cutting back doesn’t mean you have to let go of things altogether. Something as simple as dining out once a week instead of two can make a huge difference.

1. Review your budget

This is an important step to follow once you have made your budget. Reviewing it will help you keep in track with the actual plan. Also, it shows you whether you have worked accordingly or not, giving you clues where you need to work harder.