Establishing a budget is the first step in controlling your spending so that you can take control of your finances.
Discover how to make a budget, the best ways to stick to it, the most recent budgeting tools available to you, and more.
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The budget of each person varies according to their lifestyle, spending patterns, and net income. You must thoroughly examine how you spend your money before you can create a budget, which requires compiling all of your bills and pay stubs. Write down all of your monthly spending once you receive all of your bills and pay stubs. Next, make a note of your monthly income. To determine how much money you make, deduct your expenses. If the result is less than zero, you need to review your spending and saving habits because you are making more money than you are spending. A newbie can seek help with the process by using a budgeting spreadsheet, calculator, or other tools.
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The 50/30/20 general rule of thumb can help you divide your budget into three categories: needs, wants, and financial objectives. This plan allocates 50% of your income to meeting needs, 30% to satisfying wants, and 20% to saving for future expenses. Your after-tax income is used in each category.
LEARN MORE: The Benefits of a 50/30/20 Budget
You spend money each month in three categories: fixed, variable, and discretionary. Fixed expenditures are continual, required expenses that don't fluctuate in magnitude or frequency. Rent, health insurance, and phone service are a few examples. Although the amount you spend on variable expenditures varies month to month, they are still seen as important charges. Your monthly grocery and clothing spending might be categorized as variable expenses. The final category of expenses is discretionary spending, which includes things like concert tickets and a night out to dinner that you want but may not actually need.
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A zero-based budget is a budgeting strategy in which you assign every dollar of your income a job. By the end of the month, after you account for all of your expenses, savings, and spending, you should have no money left..
LEARN MORE: The Benefits of a Zero Based Budget
A spreadsheet is one of the most efficient ways to establish a budget, however you can also create one by hand or with one of the many applications or pieces of software that are readily available. You must first download an application, such as Microsoft Excel, in order to create a spreadsheet. Then you'll require a list of your set monthly expenses, a list of your variable monthly expenses, and records of all of your earnings. Next, choose how you want your spreadsheet to be organized, whether that be by putting all the data on one sheet or adding numerous tabs to the sheet. Next, keep a record of your income sources and outgoing costs. Continue to monitor your spending and saving patterns in the sheet as you compare the two.
LEARN MORE: Here's a FREE Budget Spreadsheet
“Beware of little expenses. A small leak will sink a great ship.“—Benjamin Franklin
1. They check their budget before spending.
2. The aren't afraid to change their budget for better results.
3. They give every dollar a job.
4. They are realistic and not too restrictive.
5. They always pay themselves first.
6. They forgive themselves when they go over budget.