To monitor where your monthly income goes, planning a budget every month can help you control your finances and save money. It will work for you once you have figured out the best way to track your finances. The following steps can help you plan your budget:
Step 1: Note Your Net Income
The first step in planning your monthly budget is to determine how much your income is. Always remember not to overestimate your expenses as equal to the total salary you have. Never forget to deduct your benefits, taxes, and other flexible spending accounts upon planning a budget. Your net income, your take-home pay is the actual amount to be used when planning a budget.
Step 2: Track Your Expenses
The second step in planning your budget is to track and categorize your expenses. Once you do that, it would be easier for you to make adjustments. Also, it will help you identify where you spent most of your money and where it would be better to cut back. Start listing your monthly or fixed spendings like rent, utilities, internet bills, and other fees. More likely, it would be difficult to cut back on these; however, knowing the total cost to your monthly income can be helpful to manage your remaining payment. Next would be listing your variable spendings such as groceries, gas, and entertainment which may change every month. This is where you can find an opportunity to cut back. Bank statements and credit cards are good to start to categorize your expenditures monthly. Just a tip, recording your daily spending using a pen and paper or your smartphone would be an excellent habit to track the expenses easily.
Step 3: Set Your Goals
For the third step, make a list of all your financial goals to accomplish both in the short and long term before filtering the tracked information. Short-term goals should be achieved within a year, while long-term goals take years to complete, like insurance and retirement savings. Always remember that your goals should not be just merely words but a priority that should be placed in reality. This will serve as your motivation in planning your monthly budget.
Step 4: Make A Plan
Compiled the fixed and variable expenses, then used them in planning your budget in the coming months. With the help of the list of your fixed costs, you can reasonably predict how much you have for your budget. On the other hand, the list of your variable expenses will guide you to save more money by cutting unnecessary spending. To do so, break down your expenses even further between things you need to have and things you want to have. For example, fare budget going and leaving work counts as a need while monthly movie subscription counts as a want. Once identified the difference between the two, you can make the adjustments easily.
Step 5: If Necessary, Adjust Your Habits
After documenting your income and spending, you now have what you need to complete your budget. By then, you can start evaluating your remaining money or where you can cut back for you to save money for your goals. The best area for cut back is on the wants. If you can skip an expensive dinner date and try to calculate how much you save after adjusting to it, it would be a big help. After that, proceed to your spending on needs. You may need internet at home, but do you need the fastest connection? Try to look into it.
If the figures you need to save aren’t adding up, you can adjust your fixed expenses. Doing it requires more discipline. Much is given; much is required. So be sure to weigh your decisions carefully.
Step 6: Keep Checking
Always review your budget regularly to ensure that you are on track. Comparing your monthly expenses to people similar to you can also help. Whatever happens, keep checking your budget following all the steps mentioned earlier.