How To Reduce Your Expenses By Creating A Monthly Budget
When people think of budgeting they act quite strange as if the word meant something to avoid like the plague
. The ironic thing is if people learned how to budget properly many would find themselves better off financially rather than drowning in debt like many are today.
A budget is a very powerful tool that will help you save your money, spend more economically and help you plan for the future. Many people perceive that developing a budget is a difficult and painful thing to do however, all you need is to understand the basics and then you can take your first step to getting rid of your debt.
Below are the basics you need to learn to create a budget:
Identify your expenses
When you begin setting up a monthly budget, start with the big expenses first and then identify the smaller non-essential expenses. Start by identifying your big expenses. These are usually your fixed costs that include expenses such as your rent or mortgage payments and monthly fuel bills. Once you have identified these expenses put them in category called fixed expenses.
The next stage is to identify your variable costs. These sort of costs are not fixed like your rent as these can change from month to month. An example of a variable cost would be your grocery bill, eating out expenses and birthday presents.
List Your Expenses into Two Separate Categories
Once you have identified and categorised your expenses you should have two expense groups as follows:
* Fixed costs
* Variable costs
Estimate Your Expenses
The next stage is critical. What you need to do is go through each category and identify where you can make a savings or cut backs. When you have identified them highlight them. Once you have identified these expenses you need to estimate how you much spend on each expense. To do this you will need to go through your receipts, bank statements and cheque books and total up how much you have spent on each expense. Once you have found the necessary receipts and records add your fixed and variable costs separately. Keeping them separately will make it easier for you to identify and make any necessary cut backs.
Balance Your Income and Expenses
Subtract your total fixed costs from your monthly income, if there is money still left then take that away from the variable total cost. If you find that you have money left over after subtracting the fixed and variable costs then, do not go out and spend it. Speak to a trusted financial advisor for guidance on how to invest your savings wisely. If you end up with a minus or negative balance then, it is time to cut back. Identify non-essential expenses that you can cut down on for example, if you go out for dinner at a fancy restaurant every week then make this a monthly event or try a cheaper alternative.
by: J.C. Lara
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