Budgeting 101
Creating and maintaining a budget is one of the most important things you can do to take control of your financial situation. It is nearly impossible to get out of debt or become financially independent without having a realistic budget. Most people give little thought to their spending habits; but the process of going over your income and expenses and making a budget can have a surprising and sobering effect on how you spend your hard-earned cash.
Here’s what you need to do to create a budget that works:
- Write down your monthly income from all sources. This means your take home pay (not gross income) along with any other income you have. This can be money from a part-time job, unemployment benefits, alimony, or child support, for example.
- List what you put aside for savings, no matter how small the amount.
- List your fixed monthly expenses. This normally includes your mortgage or rent, car payment, insurance, or cable bills.
- List all other expenses, such as credit card bills, utilities, food, gas, and entertainment. Be realistic.
- Calculate what money you have coming in (income) and what money is going out (expenses). This should give you a good indication of where cuts can be made in your variable expenses and applied toward more important debts.
