Creating a Budget is the first step in understanding your financial health, it is crucial to understand how you can adjust your spending habits in order to meet your financial goals.
How to create a budget?
Step 1 -
List all of your after-tax income on a monthly basis.
Step 2 -
Calculate monthly expenses, this you can break down into;
-Groceries
-Rent/mortgage/Utilities.
-Transportation
-Insurance (car/health etc)
-Eating out
-Child care
-Loans
An efficient way of doing this is to go to your online bank statement/credit card statements and from there you have a solid understanding of your expenses on a monthly basis.
Step 3 -
Calculate the difference between expenses and income.
Whatever the difference is, this will be the money you have to save/splurge/payoff debt.
If you, like me have difficulties following a budget you might want to consider allocating limits to the categories, for example $100.00 a month for eating out, if you reached that limit then it's ramen and noodle time at home until the next month comes by.
Remember this is not static, it will continually change as your life changes. Make sure to revise your budget as you deem necessary given your circumstances.
Saver's tip - Paying monthly expenses with a rewards credit card is always a good idea, as long as you pay it off every month. This way you will accumulate rewards as you pay your fixed monthly bills, they are small rewards but they add up at the end.
Till next time,
JL
Disclaimer - This blog is meant purely for educational discussion of finance. It contains only general information about financial matters. It is not financial advice, should not be treated as such.