How To Create a Budget

Creating a budget can help you keep your finances in check.You can see where your money goes by writing down your monthly income and expenses.If you know where you are financially, you can come up with a spending plan to help you reach your goals.If you want to manage your money like a pro, use helpful tools.

Step 1: Write down the amount of money you bring in.

After all of the deductions, your net monthly income is the total amount of money you actually get to take home every month.They have been subtracted.Your paychecks, child support, tips, monthly bonuses, Social Security payments, alimony, and any other payments you receive on a regular basis are included.Make a note of everything and put it all in one place.The gross income you made before taxes were taken out will be printed on your pay stubs.Don’t use your gross monthly income for this.Since overtime pay varies according to circumstances, disregard it.

Step 2: List your fixed expenses for the month.

You have to pay fixed expenses no matter what.For most of the time, these expenses stay the same.Electricity is an example of a variable fixed expense.Mortgage, rent, and/or property taxes are common fixed expenses.To calculate the average for a fluctuating expense, look at your bills from the past year, add up the monthly amounts due, and divide that total by 12.You can use that average to create a budget.

Step 3: Flexible expenses can be added by using bank statements and receipts.

You have some control over how much you spend on flexible expenses.To figure out the average amount you spend on each flexible expense, review your bank statements and receipts.Flexible expenses include household and grocery items, clothing and shoes, personal hygiene, gasoline, parking, and transportation.

Step 4: Make a list of your discretionary expenses.

Discretionary expenses are things that you have full control over.Discretionary expenses are things that you want, but don’t really need to survive.Entertainment like movies, concerts, books, magazines, and video/music streaming services are not essential expenses.

Step 5: Subtract your expenses from your income.

This math can be made easier by using a calculator.You are more or less on track if the expense total is less than the income total.You need to prioritize your expenses before you can save if the expense total is more than the income total.If your expense total is $200 less than your income total, you have an extra $200 each month to put into savings or towards a long-term goal like buying a car.If your expenses are more than your income, you may not be able to pay your bills.Determine which discretionary expenses you can get rid of to get back on track.

Step 6: To stay on top of things, set aside money for monthly expenses.

Every time you get paid, be sure to set aside money for your expenses, no exceptions.You can decide what to do with the leftover money once you set it aside.If you get paid twice a month, you should put aside $400 from each paycheck to cover your fixed expenses.Money left over can be used for groceries, gas, and clothes.Take a little out of each check to cover your monthly expenses if you get paid weekly.

Step 7: Money left over after expenses can be used for future purchases or emergencies.

After the expenses have been covered for the month, look at how much money you have left from your income.If you know you need to make a big purchase in a few months, like a car down payment or college tuition, take all or some of your leftover money and put it towards that particular goal.If you save enough, you can spend the money and remain debt-free.If you want to have a financial cushion for unforeseen expenses, retirement, or emergencies, you need to save 10% of your income each month.Keep this money separate from your spending money by opening a savings account.

Step 8: If your budget is off-track, identify expenses you can get rid of.

If you want to keep track of your spending, start writing it down or use a budget app.If you identify unnecessary expenses, you can cut them out to get your finances back on track.The amount of money you spend on food, drinks, and travel can add up.It doesn’t seem like a big deal to spend $2.50 on a cup of coffee in the morning, but it will cost you $900 a year.Think about what you could use the money for.

Step 9: Make any necessary adjustments to your budget by reviewing it each month.

At the end of the month, compare how much you spent against your budget.If you don’t see how much you spent for certain expenses, you may need to adjust your budget or get rid of some of your discretionary expenses.If you set aside $100 for groceries each month but spend a little more than that, you can increase your monthly grocery budget to $150 or $200.You can balance out the grocery expenses by removing or reducing non-essential expenses.It’s important to account for income changes.If you get a promotion at work, you can increase your discretionary spending.Unless you get back on your feet, you may need to cut some discretionary expenses, like your gym membership.

Step 10: You can use a budget worksheet to organize.

The process of creating a budget can be a little overwhelming if you’re new to it.If you want to get started with a budget, a premade one will walk you through the process of adding the common expenses to a calculator.The only thing you need to do is fill in the blanks with your monthly totals.You can download and print out many of the free options online.There are two free options to check out, one of which is the make-budget-worksheet_form.pdf.

Step 11: It’s easy to track spending with a secure budget app.

There are many apps that can help with budgeting.You can set up notifications for bill payments with the help of apps.It is easier to catch account activity that is suspicious.If your bank has an app that you can use, check it out.If you want to use a third-party budget app, like Mint or Pocketguard, make sure it offers safety features.

Step 12: A spreadsheet can be used to organize and prevent errors.

If you don’t want to use an app or prefer a more hands-on approach, a budget spreadsheet can help you stay organized and do the math for you.You can either use a free spreadsheet template or create your own using a spreadsheet program.If you want to build your own spreadsheet from the ground up, you should look at a budget template.You can get a free template to help you track expenses.

Step 13: If you want a lot of tools, you should buy budgeting software.

You usually have to pay for budgeting software, but it is fairly inexpensive.Companies often charge a small monthly fee rather than a lump sum to use it, and they provide a wealth of tools to help you with every aspect of budgeting.If you prefer using a computer to do your budget, software is your best bet.You are able to manage your budget with an app on most software.There are a lot of popular budgeting software companies.

Step 14: Review spending at the end of the month.

It’s a good idea to write down your expenses as you pay them, rather than having a big pile of receipts at the end of the month.You’ll need to manually input anything you pay cash for, even if the apps track it for you.To see if you’re meeting your goals, at the end of the month, use your spreadsheet, app, or software to review expenses and spending habits.The information can be used to make budget adjustments.If you’re budgeting with paper and a pen, look for errors.If you want to automate your budget and reduce errors, consider using a budget app.