Step-by-Step Guide to Creating a Personal Budget
December 23, 2019
Saving money can be difficult, especially when you take into account all of the different ways that you spend money — such as mortgage payments, rent, utilities, online payments, cash, debit, and (most likely) multiple credit cards. Even if you’re not living paycheck to paycheck, it’s a good idea to create a budget. The following are a few tips on how to create a personal budget that anyone can follow:
1. Determine Your Monthly Household Income
The first thing you’ll need to do is to figure out how much you bring home every month after taxes. If you have a partner, then you’ll want to take into account their income as well unless you’re deciding to do individual budgets. Without knowing how much money you have to spend every month, you’re not going to be able to put together a personal budget.
2. Identify Your Monthly Expenses
Write down all of your expenses. This list should include fixed expenses and variable expenses. Fixed expenses are expenses that you have to pay no matter what every month. For example, mortgage payments, rent, or car payments. Variable expenses are expenses that can change from one month to the next, such as how much you spend on groceries, entertainment, or gas.
3. Establish a Financial Goal
Without a financial goal, you won’t know what you’re trying to accomplish and it will be more difficult to not only create a monthly budget, but to stick to it. Decide what your goal is, whether it’s to pay off a certain debt (such as a credit card or a loan), to build up your savings, or to save up for a big purchase (such as a car or a house).
4. Create a Monthly Budget
Using your monthly income, your fixed expenses, and your financial goal, determine how much you need to save every month. Figure out how much is left after all of your expenses (both fixed and variable) are accounted for. Then begin looking through your list of variable expenses to see where you can save money.
For example, if you’re spending a lot of money eating out, you might want to put a cap on how much you can spend at restaurants in order to save money. You may even want to increase your grocery budget just a little in order to help encourage you to not eat out as much. If you’re spending a significant amount of money on gas for your car, you may want to look into public transportation or carpooling. You might be able to save some money just taking public transportation to work once or twice a week.
5. Keep Track of Your Budget
Once you have a budget in place, make sure that you keep track of it. It can be easy to lose track of how you’re spending money, so write down what you’ve spent at the end of every day so that you don’t exceed your budget.
6. Revisit Your Budget
Over time, your financial situation is likely to change, whether you’ve come into more money (as a result of a raise, a new job, or an inheritance), taken on more debt (as a result of a loan or a mortgage), or have lost money (as a result of losing a job or taking a lower-paying position). When these events happen, you should come back to your budget and reevaluate it, adjusting it as necessary.
These are six steps you should follow on how to create a personal budget. By saving money, you can meet your financial goals, whatever they may be. If you need help saving money or dealing with debt, then be sure to contact us at Safe Money Partners to schedule an appointment today.