Simple Guide to Establishing Budget

If you are one of those people who are living from paycheck to paycheck, this article is just for you. When you feel that your personal finances are pinched, do your best to take control on your spending. The first most important step is to take a thorough look at the money you earn vs. the money you spend. This will help you to maintain a budget. And the following tips will be helpful for you.

1. Take a Look at Your Income

Start with evaluating your income. Consider not only your paycheck, but a child support, a second job, alimony or any other money you may have coming in. Calculate the total amount and write it down.

2. Evaluate Your Spending

How much money is going out? This is one of the most difficult tasks to do, but it’s is extremely important when you are trying to establish a budget. Start with the fixed expenses (like insurance, rent, utilities, payments on your loans, etc.). Then, add the variable expenses (like food, entertainment, gas, etc.) and don’t forget about the money you spend on car maintenance, birthday gifts, property taxes, etc. So, add up all your monthly expenses and subtract them from the income you’ve previously calculated. This way you will get a clear idea if you are spending more than you earn.

3. Cut the Costs

Once you have written down all your expenses and income and seen that you spend more than you earn, it is the right time to think about cutting back. If you found out that you spend $60 per month drinking your favorite coffee at a local shop, consider doing this less often and try to switch to coffee at home. If it is difficult to you to determine the costs to cut, just divide all your expenses in two columns: needs and wants.

4. Try To Pay Yourself

It is extremely important to be ready for financial emergencies today. So, having an emergency fund or just setting aside some money for savings is a great move. Ideally, it is great to have tree monthly salaries in savings as we live in the word when you can unexpectedly lose your job or face some emergency that could require a solid amount of money to be settled.

5. Stick to Your Budget

Following the previous steps will definitely help you to establish a solid budget, but the most difficult task is sticking to it. Although, this may be really hard from time to time, the reward is worth the effort.

You might think that maintaining a budget is a useless thing to do, but believe that in a couple of month you will get used to keeping control on your spending and earning. Soon, it will become a good habit that won’t take much time or attention. Besides, you will be able to avoid stress that you might have had while borrowing some extra cash to make ends meet between paychecks. Just stay patient and you will definitely benefit.