Times are tough— and they’re only getting tougher. Prices go up every single day, and taxes are upped every now and then. Not everything is as cheap as it was 10 or 15 years ago, so it’s easy to overspend and end up with a lot less money at the end of the month than you anticipated. To overcome this hurdle, it’s wise to put together a budget. A budget will give you more insight into your spending habits, and will help you keep track of your spending. Lucky for you, it’s not actually that difficult to put together a good budget. In fact, with the three steps in this article, even you can put together a budget. Curious? Read on to find out how to make a budget.
The first step to making a budget (that you can actually stick to) is figuring out your exact income and what you spend your money on. Income doesn’t necessarily need to be the monthly paycheck you receive from your job; it can also be the odd yard sale income or money that’s come into your possession any other way. Use your net income (the amount of money left after taxes and deductions) for your budget. Once you figure out the exact number, you can start managing your money wisely.
You might have student loans or monthly car payments that need to be made. Or, you might be stuck with an expensive loan with high interest, which of course is not ideal. Making a budget isn’t just about tracking your spending and spending money wisely, it’s also about figuring out how to quickly and efficiently pay off loans and pay bills without racking up huge interest over time. Prioritize bills, and if you have multiple loans, pay off the loan with the highest interest first. Set aside a set amount of money for paying off debts every month. Make sure this amount has its own category, so you won’t be tempted to spend the money on trivial things. You need this money!
Most of your money will be spent paying off bills, cars, or loans. The second step in figuring out a budget is taking out the money for bills and seeing what kind of amount you have left. How much do you spend on groceries? Gas? Electric bill? Phone plan? All of these things need to be paid off monthly or weekly. Determine what the total of that comes to and subtract that from your net income. It’s okay if it’s not correct; an estimate is just fine. After you subtract it, the number you will be left with will be the amount of money you can spend on other things. This number is not set in stone, however, because you will need a month or two to figure out if your estimates are actually on point. If they aren’t; it could be that you’re left with a lot less than you originally calculated in your budget.
Tip: Don’t be alarmed when you find out how much you actually spend on things, even if they seem trivial. Making a budget can be somewhat of a reality check, and that’s okay! We all need one of those every now and then. What you should do first is prioritize what bills need to be paid off. By prioritizing your expenses, you will gain better insight into how long it will take to pay something off and what expenses you can’t skimp on.
Sometimes a budget isn’t enough. If you continuously overspend every month, you will rack up a huge debt. This debt can’t just be fixed by making a budget; although, it can help you a little. Making a budget is a small step in fixing a mountain of debt. If you’re in too deep, you might have to consider cutting into some of your major financial commitments. Is the car costing you 600 dollars in gas, insurances and maintenance a month? Consider getting rid of your car and choosing public transport or biking. Is the rent just too high for your budget? Consider moving or taking in a roommate to share the rent with. Nobody said getting rid of debt and spending money responsibly was easy, but by taking drastic measures like these you might see yourself climbing and conquering that mountain of debt within no time.
So, to summarize this article, there are a couple steps you need to follow to make a budget for yourself. Step 1 is to figure out your income and track your spending. This step can’t be skipped! The next step helps you determine what is important and what needs to be paid off first. The third step is calculating your expenses, so that you know how much you have left to spend on fun things.