5 Simple Steps to Creating a Budget

Whether you’re looking to improve the finances of your household, a club, or your business, every financial plan has to start with a budget. A budget is the first step to maximizing your financial freedom without adding income streams or entering the complicated world of stocks and bonds. Therefore, you should concentrate on making a budget that works for you. Here are 5 simple steps to creating a budget.

1: Look at Your Income

You should start at the beginning: how much money do you make before taxes? If your income varies, figure out the average, but you’ll want to be as accurate as possible. Factor in every income stream you have, from your paycheck to alimony to any gigs you pick up throughout the month. Once you know what your income actually is, you can begin to figure out what your budget should look like.

2: Add Up Expenses

Adding up your current expenses is an essential step towards creating a budget. Break up your spending into essential, non-negotiable categories such as housing, utilities, transportation, and food. After those necessary categories, you can look at what you’re spending on other things such as dining out, entertainment, and clothing. There are many free templates available, such at the ones on manuelmattz.com, that will allow you to set these expenses down and look at them all lined up.

3: Figure Out the Difference

If you’re trying to get more money into your savings account, then the difference between your income and expenses is absolutely crucial. If you aren’t happy with what you’re able to save each month, you have two options. You can either make more money or spend less money. Generally speaking, it’s far easier to spend less, and so you should look back at your non-essential expenses and decide what can be reduced. You can find entertainment that costs less or decide to dine out less often.

4: Assign Purpose to Your Savings

Having savings is all well and good, but there are many ways to use your savings in a way that will help you financially in the long term. If you have high interest debt, you can consider putting aside a certain percentage of what you’re saving each month towards paying it off more quickly. You can also assign purpose to your savings by building up a 3 month emergency fund. To do this, look at your average essential monthly savings and make it a goal to be able to have that amount in your savings account at all times. This will make you feel more secure and protect you in the eventuality that your income takes a sudden dip.

5: Maintain The Habit

Just making a budget isn’t worth very much if you don’t stick with it. After a month on the budget you decide, review the savings and decide whether you need to tweak it. This is also a good way to see just how much your savings can accrue over time if you make a budget and stick to it. There are also a number of resources online that can help you to stick to your budget and track your actual spending. If you’re having trouble sticking to your budget, then you should consider giving one of these resources a shot.

While the idea of making and sticking to a budget may be overwhelming at first, your overall financial security and happiness will be increased if you don’t have to stress as much about money. There are so many simple ways to increase your financial security, and following these steps for a simple budget is a great first step.

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