Creating a budget is a simple and effective way to find gaps in spending and help you become financially stable. Strong budgets lead to financial empowerment, actionable items, and the ability to make intelligent decisions about your money.
A monthly budget provides information which will empower you financially. Budgets might not be exciting or sexy, but the result of budgeting can lead to attractive bank accounts. Businesses spend millions of dollars every year coordinating their budgets. Luckily, it doesn’t cost anything for a personal budget to be set up. The following steps will allow for a simple, effective budget to be created. Here’s how you can start budgeting today.
#Step 1: Identify and Calculate Income
Income is what you make monthly through employment and side hustles. Budgets rely heavily on knowing available resources you will have every month to pay your bills. It’s the most crucial piece. Businesses start with Revenue and personal budgets start with your income. Be conservative with any estimations included as income, you’d rather have more than you thought than less.
#Step 2: Identify and Calculate Expenses
Next up, expenses. What monthly recurring bills do you have? Mortgage, insurance, utilities, groceries, and debt payments should be laid out. Entertainment and other non-recurring payments can be estimated to make sure you capture them. A good approach to your expenses is to slightly overstate what you pay out each month.
#Step 3: Select Method to Record Budget
Recording a monthly budget is very straightforward. Choose a method that feels comfortable and record the information from steps 1 and 2. Spreadsheets, pen and paper, or apps are all great options. Pick the method of your preference and layout your budget. As a part of this step, decide whether a monthly or annual budget fits you best.
#Step 4: Review Budget Created
After your budget is written down, take a second look at it. Check for inaccuracies or possible opportunities. If you are really lucky, there will be money for savings, investments, and a few frivolous items. Where possible, review recurring expenses and identify competitive options.
#Step 5: Keep Historical Data
Past budgets provide a baseline for future budgets. The data will also allow you to see how far you’ve come. For no other reason, keep the past budgets you made and admire how smart you are!
Free downloadable budget template: