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Creating a budget may take a little work, but it will prove to be more than worth it. A budget will provide you with a clear overview of your financial situation. It will let you know how well you are managing your money at the present moment and what impact that may have on your future. The information below will help you create a monthly budget and set your finances straight.
Your Expenses
To begin with, begin to carry around a notepad or using a virtual notepad on your phone to record all of your expenses. Save all of your receipts as well. This data is going to help you determine approximately how much you spend per month on variable costs. Your credit card bill can be very helpful in this stage. Make a record of each charge that you make that is not a fixed expense. Record the category that every purchase is in so that when you finish, you will have a detailed report of where your money is being spent. Examples of categories are: grocery store, pharmacy, gas, dining out, entertainment, and clothing stores.
If you are fairly good with computers or at least have a basic understanding of how to use Microsoft Excel, Word, or another similar program, you should record all of this information in a document on your computer. Having your finances typed out in a program like Word will help keep everything neat, organized, and easy to read. Excel is a bit more complicated to use, but it is a very useful tool for creating budgets because it can perform mathematical calculations and make charts out of your data. If it is easier for you to do everything by hand, use a spreadsheet or ledger sheet to record your finances. Make sure the sheet is easy to read and understand.
The next step is to gather and write down all of your fixed expenses. This includes expenses like your cell phone bill, monthly mortgage or rent payment, utility costs, and all of your insurance premiums. Once you have finished this step, you should be able to determine how much you spend per month on average. This will give you a clear indication of your monthly expenditures and where the money is being spent.
Your Income
It is usually much easier and quicker to determine your monthly income than it is to determine your monthly expenses. Outside of your regular job, think of any other income that you earn throughout the year and record it – for example, if you have a second more informal job, like babysitting, add the total to the income column. The more accurate you are with your numbers for your income and expenses, the better job you will do managing your money in the end.
(Monthly Income) – (Monthly Expenses) = ?
This is the third part of the process of creating a budget. Although the first three stages are always the same, the ones that follow it are going to be different for everyone. The number you are left with after subtracting your monthly expenses from your monthly income will determine what you should do next. If you get a positive number that you are happy with, you will want to see what kinds of options you have to put your extra money towards. If you have a low positive number that you are unsatisfied with or a negative number, you are going to have to look into cutting back on your expenses.
Extra Funds
If you have managed your money well, and you have extra funds left over from your income, you want to be as smart as you can with that extra money. Thinking of it as nothing more than extra spending money may very well put you on the other side of the equation the next time you calculate your budget. If you have any credit card debt or another type of debt, use the money to pay off your debts as soon as you can. The quicker you pay off your debt, the less money you will pay in interest. Once you have eliminated or minimized your debt, you can use your extra income for things more enjoyable than paying off debt.
By adding a certain amount of money to a retirement, savings, or emergency fund every month, the total amount you have in that account will build very quickly. Every deposit you make will raise your account balance and increase the amount that you will earn on your next interest payment. Even if step three left you with a positive number, you still may want to consider cutting back on your expenses, if you can reasonably do so and want to have more money available at the end of each month.
Overspending
If you are spending too much, look at the budget you created and see where your money is going. There are some areas that are easier and more flexible to cut down on than others. For example, if you are spending a lot of money on gas, you could consider using public transportation more often. If public transportation is not dependable or convenient in your area, this may not be a good option for you. You then need to look at your other categories and look to cut down on your spending in your dining out, entertainment and clothing categories.
Shopping expenses are another category that can significantly reduce. If you aren’t in substantial debt, you may not have to shop any less than you normally do. The key is shopping smarter. By using coupons and promo codes when you shop, you can save hundreds or thousands of dollars per year. Websites like IBotDis.com will give you access to coupons and promo codes for thousands of companies on a daily basis.
Raising Your Income
If cutting down isn’t possible or isn’t enough, you can raise your income in a number of ways. The most obvious one is getting a second job. Even a part time job that you work at a few nights a week can make a big financial difference in your life. You can also look to babysit, nanny, or do other side jobs to earn some extra money. Freelance jobs can be found anywhere, both on and offline, so it’s best to place as few limits on your search as possible.
Contacting Credit Card Companies
Many people are in credit card debt, paying astronomical amounts towards the interest of the amount owed to the credit card company. Firstly, stop purchasing on your credit cards – pay by debit card, cash or check. Secondly, many credit card companies realize that their customers are in dire financial straits and are unable to continue making their current monthly payments. Instead of risking a loss of that account or client, they will discuss a financial arrangement whereby your payments are reduced and therefore you are more likely to continue making payments on the account. Contact your credit card company immediately, to see if this is a solution for you.
Consumer Credit Counseling
Sometimes even lower interest rate payments are not enough to guide you through a tough financial period. At this time, you may want to review your financial situation with a Consumer Credit Counseling company. A Consumer Credit Counseling company is able to offer insight and advice on your financial options. One of these might be to consolidate your debt into one monthly payment. However, there are many options to financial problems. Seek guidance and help if you are unsure of your alternatives.