Are you itching to be financially responsible and make a monthly budget to control your spending? Then this article is for you! Continue reading to find out more.
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A monthly budget is a plan on how you will spend your money every month. It will help you allocate money to cover your expenditures such as housing, food, transportation, insurance, credit card payments, and others.
A monthly budget is essential for the following reasons:
Here are ways to create a budget tailored to your income and expenses:
The first step to budgeting is to determine your monthly income. It’s vital to make sure that the budget you make doesn’t involve spending more money than your earnings. When calculating your income, use your “take-home pay” – the money left after payroll deductions. You should also include pensions, child support, dividend earnings, and others that’ll affect your budget.
Gathering financial statements for the last three months will help you have a bird’s-eye view of how much money is coming in and will be needed for your expenses. Include your monthly income and expenses, investment accounts, credit cards, benefit statements, and others where you typically spend money.
Fixed expenses are payments that are relatively consistent monthly; they are your needs rather than wants. Examples of fixed expenses include rent or mortgage, health insurance, utility bills, car payments, TV, internet, and mobile services.
Meanwhile, variable expenses are classified as wants such as travel, gifts, dining, and entertainment. If you see that too much money is being spent on your wants, you need to trim your expenses to save more so you can build an emergency fund or save for retirement.
This model is a popular approach to budgeting. You divide your income into three according to the following percentage: 50% for your “needs,” such as food, rent, utility bills, etc.; 30% for “wants” such as travels or entertainment, and 20% for savings and debt repayment.
Life’s circumstances and your priorities may change over time. You can revise it for changes in your income and financial priorities.
Here are additional tips you can follow:
Budgeting is about spending money on the things that matter most. Remember that a well-planned and executed budget can make a significant difference.
Also Read: Alternatives to An Online PayDay Loan
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