Knowing where your money goes each month and how you spend your money every month is an important thing that can really help you have control over your finances. And there’s no better way to do this than to create a budget and stick to it.
What Is A Budget?
A budget is a plan created to guide and control how you spend your money based on your income and expenses. In simple terms, it is a plan that contains how much money you make and spend over a specified period of time.
A budget helps you know where your money is going every month. It also helps you to manage your money the right way.
The following steps can help you create a budget:
5 Steps To Create A Budget
1. Calculate Your Income
Record the amount of money you make every month. The easiest way to do this is to write down all your sources of income and the amount of money you make from each one.
If you make irregular income, you can calculate the average amount of money you make every month and where the money comes from and take the average.
If you can’t remember, you can also take a look at your transactions on your bank app and try to see how much was paid into your accounts in the last 3 months.
2. Add Your Monthly Expenses
Once you’ve calculated your income, the next thing is to add your expenses.
Start by writing your fixed expenses, that is, your regular monthly expenses such as:
- electricity bills gas and phone bills
- food and groceries
- medical costs
- transport costs
- family costs.
Then write your variable expenses, that is, those that vary every month such as:
- car repairs
- extra medical costs
3. Set Your Monthly Spending Limit
After writing down your expenses, the next thing is to write down how much you plan to spend on each one of these expenses every month.
This is the part where you need to cut back on some of these expenses. You will also need to put your income into consideration as you must not spend more than your income every month.
4. Set Your Monthly Savings Goal
After deciding on how much you want to spend every month, the next thing is to decide your monthly savings goals.
The money you have left after expenses should go into your savings and investments.
Set your monthly savings goal and make a plan on how you want to achieve it.
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5. Adjust your budget
As months go by, there will be a time when your expenses start to go beyond your income. At this point, you will need to adjust your budget.
You may need to reduce your spending or change your savings goal.
I will also advise that you start looking for how to increase your income.
>> MUST-READ: 8 Easiest Ways To Make More Money
These 5 simple steps listed above are more than enough for you to create a perfect budget for your money.
Once your budget is ready, it’s important that you stick to it and also review your spending on a regular basis to be sure you are staying on track. I will advise you to review it every month.
>> RELATED: 5 Steps To Track Your Expenses Every Month