Setting up your budget is the first step towards financial freedom and limiting your stress about money. It is not as easy as it might seem, however. Here are some steps you can take to establish a budget.
First, you will need to determine how much you make. This can be varied, particularly if you work an hourly job where your hours change from week to week. Try to get an idea of your average income for each month. Do not forget non-work sources of income, like child support or state aid programs.
Next, list your fixed expenses, such as your car or insurance payments. These will not change from month to month and make a great starting place for your budget planning. Try to set aside 10 percent of your income into your savings as part of these fixed expenses.
The tricky part comes next, and that is determining your variable expenses. Things like clothing, entertainment, groceries, and toiletries may not cost the same from one month to the next. Do not forget about the cost of gas, feeding and caring for pets, medical needs, or other common categories when determining this category. If possible, go back through your bank and credit card statements for the last two to three months to make this determination.
Now that you have all of your expenses listed, compare them to your income. By doing this, you will see if you are over spending, or if you have more “free” money than you thought. Chances are your expenses are more than your income. At this point, you will need to find places to trim your expenses so you can live within your means. Remember, cable TV is great, but if you cannot afford it, you do not need it.
Now, setting up your budget is just the starting point. After you have it in place, you need to track your expenses for a while. Consider using budgeting software to do this. This will ensure you are sticking to your plan, and it will also allow you to make adjustments as needed when you face unexpected expenses. The best way to budget your money is to make it workable and flexible, so always be willing to change things up when you need to.
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