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Make a Budget in 6 Simple Steps
- Gather every financial statement you can (bank statements, investment accounts, recent utility bills).
- Record all of your sources of income.
- Create a list of monthly expenses.
- Break expenses into 2 categories: fixed and variable.
- Total your monthly income and monthly expenses.
- Make adjustments to expenses: If you have accurately identified and listed all of your expenses, the ultimate goal would be to have your income and expense columns to be equal.
MORE IDEAS FROM THE ARTICLE
As a personal financial planning tool, a written, monthly budget allows you to plan for how you'll spend and/or save your money each month and also keep track of your spending patterns.
With a budget, you can begin to prioritize your spending and better manage your money and financial future.
RELATED IDEAS
It breaks down your budget categories into three broad segments:
- 50%: Essential Expenses like housing, automobile expenses, groceries, insurance, utilities, etc.
- 30%: Discretionary Expenses (Non-essential) like Dining out, entertainment, drinks, etc.
- 20%: Financial Goals including mortgage, home, and educational savings.
If there is heavy credit-card debt, the financial goals should be 30% and non-essential spendings only 20%.
Budgets are necessary for running any business efficiently and effectively.
- Budget Development Process. Assumptions related to projected sales, trends, cost trends, and the overall economic outlook is established for the upcoming period. The budget is then published and outlines the standards and procedures used to develop it. The master budget includes forecasts of cash inflows and outflows, budgeted financial statements, and an overall financing plan.
- Static Vs. Flexible Budgets. A static budget remains unchanged over the life of the budget. A flexible budget has a relational value to certain variables, such as sales levels, production levels, or other economic factors.
- you don’t have to go through the trouble of making an additional transfer
- it won’t be as tempting to spend money that’s sitting in a savings account that you don’t make regular transactions out of.