Steps To An Easy Budget
Budgeting should be used as a way to track spending vs income
, so that we can be doing more than just covering our expenses month to month. Really, there's not a lot to it. Here are some easy steps in creating a great budget.
Using an Excel spreadsheet can make your budget tracking easier! There's not a more simple way to manage things than by using excel.
And the good news? You don't have to know much about the program to make it effective.
Create several columns and list your income and expenses. With a little effort you'll be able to automatically total your budget figures, making things much easier on you!
Determine your monthly net income. It's simple... how much money do you make on a monthly basis?
Remember, though, Uncle Sam is going to take his, so you need to make sure you track your NET income instead of your GROSS income. What's the difference?
Well- net income is your actual dollar figure that goes into you bank when you cash your check; or, in other words, it's what you don't pay in taxes.
Your gross dollar figure would be what you would get paid if the government didn't take our theirs.
Make sure you figure your budget off of your net income. Hey- if you never touch the money, then it was never yours, right?
Figure out your fixed costs. What's a fixed cost?
Well- consider your car payment, mortgage, health insurance, car insurance, and anything else that doesn't change month to month. Also, make sure you include in that set of expenses 10 to 15 percent of your income you'll be paying yourself with.
After all, if you don't plan on saving and treat it like a must, you'll never do it. Make your long term savings goals a REAL expense to you now.
Now figure out your variable costs. These would be expenses that you can plan on from month to month but that can change depending on your behavior.
Your groceries, eating out, entertainment, and clothing expenses could be on this particular list. And because we have the capability of lowering these expenses based on our behavior, we can use this as one of the biggest tools to cut into our debts and/or build wealth. You NEED to know your variable costs in order to make changes in your spending habits.
After determining all of your costs, you need to set goals. Pick numbers under each of your categories that reflect something to shoot for. This applies mostly to your variable costs, as you have the power each month to cut down where you need to.
Keep your receipts or else you'll forget to record some of your spendings. If you keep your receipts in your purse or wallet, you can take them out nightly and tally them up quite easily.
Nightly recording can be very helpful and you will set a good habit by doing it.
It's understandable that there are going to be times when this is the last thing you want to worry about after getting home from a long day at work.
If you can keep up on it, you'll be glad. And it eliminates a lot of the possibility of error, meaning you'll have a more accurate set of numbers at the end of the month to evaluate.
You should have several categories for your expenses. For example, you might have a health care category or a automobile category.
Within each one, make sure you are recording specific expenses. For example (with a car), gasoline, insurance, and maintenance. That way when you see a large figure that month for your car, you'll be able to identify where changes need to be made.
by: Jack Landry
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