We all know that it’s important to plan ahead financially and create a realistic budget — but unfortunately, most of us just coast through life ignoring our financial well being. To help things run smoothly, we’ve put together a few tips that can help you, especially if you are like many of us, and have a hard time budgeting your money.
1. FIGURE OUT YOUR EXPENSES
Find out exactly what you spend each month. It’s important you write down all of your expenses including those that are intermittent such as insurance payments. Add everything up for the year and then divide by 12. When creating this expense report you want to factor in unexpected home, utility and car expenses. For example, if you spend $1500 per month you’ll need to add an extra 10 to 15 percent for the unexpected repair.
2. HOW MUCH DO YOU MAKE?
You need to really determine what your income is. Sure, you probably have a regular salary but you might also have extra funds that come to you throughout the year. This might come from gifts, sales, garage sales, alimony, child support, dividends, rental income and other options.
3. ESTABLISH PAYOFF GOALS
You need to determine what your income and expenses are so you can also set your debt payoff goal. Subtract your monthly expenses from your income to see if you are making more money than you’re spending. Select an amount that you can use to pay off the debt on your car, credit card, or mortgage. This is an amount in excess of your minimum monthly payment.
If you spend more than you make then you need to start making budget cuts so you can create a realistic budget. How do you do this? You need to track all of your spending habits. Record every expense for a month, even insignificant items like movie tickets, cups of coffee, ice cream as these can add up. Just $5 a week on snacks adds up to $250 per year. When you know how you spend your money, you can cut those frivolous expenses down until they are below your income.
4. START SAVING
Cut enough out of your expenses so you can save 10 to 20 percent of your income per month. If you can’t cut enough out of your budget then think of ways you can increase your income so you can make this savings.
5. STICK TO THE PROGRAM
Keep tracking your expenses even when you go overboard. One of the best ways to cut your spending is by tracking them. When you have to write down every expense you start thinking twice before you splurge on anything.
THE BOTTOM LINE
You’re not alone. Many people fail to budget. Sometimes, they get into serious financial trouble as a result. The lack of a good budget and savings plan can cause serious debt, the loss of your assets and even personal problems. To prevent this from happening, it is important to take control of your finances and create an appropriate budget, an appropriate pay off system and an effective savings plan.
We all make mistakes and sticking to a budget is hard, but the more you try the more likely you are to be successful in your efforts. It just takes a little consistency and effort. Like going on a diet, you can overspend one day, but the next you need to get back on track and stick to your budget.
