Building a budget for yourself isn’t a difficult thing to do, but you have to be discipline to follow it. Budgets are meant to allow us to see where the flow of finances is directed, while also allowing for effective planning for spending in the future. When done correctly, building a budget will help to save a good amount of money, by identifying areas that need improvement, as well as the mandatory expenses which need to be covered. Here are three simple tips to build a budget:
First, Determine Your Income
You may wonder how to build a budget, but it is very easy. First things first, take out a piece of paper and list out all of your income sources in the upper left corner. Write out how much you make from each source every month, and add them up into one total value. If your income fluctuates each month, take the lowest amount that you have earned over the last few months and make that the total. This way you will not spend more than you receive.
Second, Determine Your Expenses
The second step is calculating your expenses from the last few months. Calculate all your expenses from bills you pay every month to the diet coke from a gas station you purchased. Write this portion in the middle of your paper.
It is important to know what you have been spending your money on when building a budget. You may be surprised how much money you spend on certain items. Total your expenses into one number and compare it to your total income in the upper left corner. Does it exceed your monthly income? If it does than you are spending more than you make and that is never a good thing.
Third, Determine Needs
Look through that list of expenses and circle the things that are needs. For example, rent payments, phone and utility bills, food, etc. Determine how much you have to spend to survive. If you have money left over, you can save that money for other activities or hobbies.
Understand that budgeting may take some time to perfect it. Make sure you always have back-up money in your budget in case of unexpected emergency situations.
Budgeting can be a very fun activity that helps in many ways. Don’t be hesitant to start a budget, start now! Thank you for reading, we hope you have learned a lot when learning how to build a budget.