Tackling your finances and getting them under control can feel overwhelming. There are many secrets to making sound financial decisions throughout your life, but one key aspect that needs to come before everything else is creating and maintaining a budget. No matter where your finances are right now, you can start by creating a budget to get you closer to your financial goals. Here are some easy steps you can take starting where you are now.
The first thing you need to do is assess your income. This is the amount of money that comes into your bank account every month from any source. You will need to find the amount of income that you have to work with each month. Gross income refers to how much you make each month, but that will not give you an accurate idea of how to create a budget.
The total you make isn’t accurate because amounts are taken out for insurance, retirement, or social security with each paycheck. You need to work with the net income which is what you take home each month. Framing your budget around these amounts will help you to get an accurate snapshot of your finances.
Once you know what your income is each month, you need to sit down and determine what your expenses are each month. Start with the big expenses like housing, utilities, health insurance, and car payments. Don’t forget things like school costs for your children, or any elderly in home care you cover for your parents. Next, move on to the other expenses that are necessary like gas, internet, groceries, and phone bills. Finally, you will need to take into account the amount you spend on extra things like entertainment, clothing, subscriptions, and other interests.
Compare and Adjust
Once you know how much you make each month and how much you are spending, you will be able to create a budget. You should have more money than you are bringing in than you are spending. You should be saving and investing the extra that comes in each month.
If you are spending more than you are earning, then you will need to make adjustments. You can look for cheaper housing, bundle home, and auto insurance policies, visit LoanonYourCar.com, find a less expensive phone plan, and cut back on your entertainment and subscription spending each month.
You should also have an emergency fund in a savings account that is available if you need to pay an unexpected bill, like a car repair. Start off by keeping a thousand dollars in this account that you can draw on without ruining your monthly budget if you need some extra cash.
Eventually, you should grow that number to be enough to cover all your monthly expenses for one month and then three months. Unexpected medical problems of the loss of a job can happen to anyone, and if you do not have an emergency fund, you may not know what to do. If you save up enough to cover a couple of months, then you will be able to pay your bills without worrying for a couple of months while you search for a new job or heal from your injury.