How to make a budget
Make the decision to finally create a budget can be become extremely overwhelming. Indeed, only 30% of people in america have a monthly budget that works. In other words, people are making money but in the end they end up spending it all without knowing where it went. This is not necessarily a good thing since this situation can create a lot of problems for them. The main one is spending more than you earn. This situation can lead people to a lot of debts since they are using credit cards. Then all the debts are putting people in a viscious circle from witch it's very hard to get out. This is why this article will help building a budget in some easy steps.
- Taking the decision to start a budget.
The first step take is really to decide to create your budget. So, if you are reading this article This means you finally decided to take your finances seriously. Creating the budget will be the hardest part. But, when you will have it ready you will exactly know where your expenses are going.
- Understanding how much money you have
This is very simple to do, simply make a list of all your checking, saving and investment accounts. When it's all done open an excel file and write evrything down. This will help you understand how much money you exactly have.
- Find how much money you owe
Make a list of all your current debts. It could be credit cards, car payment and mortage. Then write down the interest rate on every debt. This is very important for you to know because it will help decide what debts are going to be paid first. Also, it will help you know what are your monthly expenses.
- Know how much money you are making
Make a list of all your income source and write down your income after taxes. This way you will know what is your real salary. Then you will be able to have a brief idea of how much you really make.
- Calculate all your monthly expenses
At this stage you have all the information you need to calculate what are your monthly spendings. This have to include all your expenses and the sources from where they came. This way you will know exactly how much you spend on each thing.
- Fix an objective
Now that you know how much you make and how much you spend, it's time to set your first financial goal. It could be going on vacation, making a down payment for a home a car or even having money to start your business. Your goal has to be the more accurate possible with a financial goal and a realistic dead line.
- Cut unnecessary expenses
Now its time for you to make all the right adjustments to your expenses to met your first financial goal. Indeed, you cannot stop living but at the same time if you see that your current expenses are to high to met your financial goal it's for you to cut all the unneeded expenses.
Finally, it will be easy but you have to stay on the track. This will help you grow in the long run. Not only will you have more financial freedom but building a budget will help become more disciplined and not spend your money on anything.