Creating a budget can be a difficult and tiresome task but learning how to budget for your personal expenses is key to financial health.
Educating yourself on how to budget money is the first step to ensuring healthy finances, even if you currently have a budget. There is always room for improvement, especially if you have found that your current budget is not working for you.
Whether you are starting over from scratch or creating your first budget, these steps may be able to help you learn how to create a budget.
What is a budget?
A budget is a written monthly plan that includes all expenses and income to ensure your spending stays within the limits of your monthly income. When you write down your expenses and income, it can be easier to see where your problem areas are or where you can cut back on expenses. It may even help you to stick to your budget when you have a visual of your financial situation.
How to start a budget
Start your budget by listing all of your income and your expenses each month, estimating the expenses that may change every month such as groceries or electricity. Don’t forget to account for bills that are not monthly such as annual fees or bimonthly subscriptions—you will still need to leave money to cover those expenses. Download our template to help get you started and to see what expenses you should include in your budget.
How to make a budget
Once you have your income and expenses listed, make sure the income is always higher than the expenses. If your expenses are higher than your monthly income, you may need to trim some line items.
Keep in mind that a budget is an estimation of expenses so be flexible when creating a budget. Divide your expenses into two categories: fixed and variable. The variable expenses such as groceries or car expenses may change from month-to-month. Leave room in your budget for these line items to ensure your income can still pay for months where they may be a little higher.
You should also leave room in your budget for savings or an emergency fund. These things may be able to help keep you out of debt or help get you out if you are already in debt. If you are saving up for a specific purchase, include the amount of money you would like to set aside each month for this item when creating your budget.
How to budget and save money
Budgeting your money ensures you have enough money coming in to cover your monthly expenses, but it can also help you save money. Now that you have your monthly expenses in front of you, it is a lot easier to see where you can cut back, regardless of your income.
Cut back where you can on essential and non-essential expenses to make your income go farther by saving money. Saving even a little on these line items may be able to make a huge difference in your budget.
If you have trouble sticking to your budget and you find yourself in debt, give a ClearOne Advantage Certified Debt Specialist a call at 866-481-1597 to discuss your best debt relief options and get a free savings estimate.