Budgeting is an art form that might seem difficult to grasp at first. However, it will be easier for you once you develop a system. The following is a little bit of guidance on the budgeting process. With some practice, you’ll know exactly how much you can spend each pay cycle, and you’ll know what you need to do.
Add Up All Your Income
The first step in budgeting is to find out how much income you expect to bring into your household each month. Try to gather your pay stubs for the past 12 months and calculate an average from that. Calculating a monthly average should compensate for any variations in your work hours or pay. Use the average as the total amount of income that you will have each month for your budget.
Add Up All Your Expenses
The next part is to add up all of your monthly expenses. This part will take more care and concentration because you’ll need to ensure that you add up all of your monthly expenses. Add bills such as credit card payments, insurance payments, rent, student loans, utilities, car payments and the like. You’ll also want to add necessities like transportation and fuel costs, food costs and clothing expenses. A third category that you should add to your expenses is your “recreational” costs. Think ahead about what you want to do in your spare time and what items you want to buy. Add movie nights, dining out and shopping expenses to this list if you plan to make them a regular part of your life. Set a clear amount that you want to put toward those activities each month, and don’t deviate from that set amount.
Subtract Your Expenses From Your Income
Once you have a complete list and calculation of your expenses, you’ll need to subtract the total from your total income amount. That will leave you with somewhat of a “disposable” income figure. It’s what you’re left with after you take care of your bills, necessities and recreation. The next step will require you to take a portion of your disposable income and put it into your savings account.
Separate Your Savings From What’s Left Over
You will need two types of accounts for proper budgeting. You’ll need to have a free personal checking account, and you’ll need to have a savings account. The checking account is where you will keep the money to pay your bills each month. The savings account is where you will deposit a portion of your disposable income before you use the rest of it as spending cash. The amount that you save each pay cycle depends on what you feel comfortable with. If you don’t have a checking or savings account make sure to open one at your local bank or credit union. For example, if you live in Nebraska, you can open a free personal checking account in La Vista, NE.
Put 50 percent of it away if you feel as though you can make it to the next pay cycle with the 50 percent that you have left. Put 25 percent of it into your savings if you think that’s a better percentage for you. The key to budgeting and saving is to refuse to touch your funds once you put them into your savings account. You will use the money for emergencies only. That’s why it’s important to make your savings percentage something that you can manage.
Use the Rest as You Like
Once you drop the funds into your savings account, you can do whatever you like with the rest of the money. It’s yours to dispose of in any way that you so desire. You can put some of that money into your savings account the following pay cycle if you have some left over. It’s a good idea to roll your disposable funds over into your savings if that’s the case. That way you can build your savings up faster than you thought you ever would.
Try the New Budgeting Technique Today
Now you have an idea of how to get started with budgeting. Go through the steps stated above and see where you’re at after that. You should be able to navigate through your pay weeks much more smoothly after you incorporate the budget into your lifestyle. If you have any issues, you can tweak the plan as needed.
