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.
Unfortunately, many college students view the idea of living on a budget with as much disdain as death and taxes. But living on a budget is important for everyone and especially for students who often face different challenges when managing their money. If you are currently a college student or will be soon, knowing how to create a realistic budget (one that you can actually live on and stick to) is one of the biggest financial favors you can do for yourself.
Here's a frightening statistic: More than seven out of ten American workers are living from paycheck to paycheck. In these tough economic times everyone wonders how they can stretch their paychecks as far as possible. Having a creative approach towards your budget can make your hard-earned dollars go even further.
When you are calculating your own personal budget, entertainment should be included in the "wants" category. While you don't actually need entertainment to survive, it certainly is a good thing to budget for. Knowing how to realistically set your entertainment budget can keep you on the right financial track.
Real financial security is almost impossible to achieve without an honest, workable budget in place. Understanding where and how much you should spend on specific expenses can help you create a budget which is both manageable and realistic. Knowing and following certain guidelines can make it easier to stick to your budget which in turn can increase your chances of success.