A budget is an estimate of income and expenditures for a given period of time, and it is compiled and re-evaluated on a regular basis. A budget can be made for an individual, a group of people, a corporation, a government, or pretty much anything that makes and spends money.
The specifics of your budget will depend on your goals and individual financial situation. However, the procedures for making a budget are generally the same. Here are the seven simple ways to make a budget.
Add Up Your Total Income
In this, all sources of income should be included, such as salaries, tips, Social Security, disability payments, alimony, and investment income.
Track Your Spending
Keep a record of every dollar you spend for a month, whether you buy with cash or a credit card, to determine what your true out-of-pocket costs are. This includes utilities, subscriptions, and automatic payments.
Set Financial Goals
Do you want financial savings? Repay debt? Stop spending too much? Set achievable objectives? Keep in mind that you can change these over time. Decide on the most important goals first, such as debt repayment or setting up an emergency fund.
Calculate Mandatory Expenses
These are expenses that you have to pay on a regular basis, such as rent, insurance, taxes, child care, or your cell phone bill. These are deducted from your overall income.
Identify Debt Payments
Find the minimum payment due on each debt if you are paying down debt such as student loans or a credit card bill.
Make A Spending Plan
The amount of income you have left is what you can spend on discretionary expenses. These can be saving money or paying off debt. It also includes things like food, transportation, entertainment, or surprise expenses.
Adjust each month
Examine your goals and spending each month. Where you allocate your discretionary funds may need to be reviewed and adjusted. You can prevent overpaying if you have a flexible budget.