1ST STEP TO MANAGE YOUR MONTHLY BUGET OPEN CRED ADD - LINK CLICK HERE OR SCAN
Five simple steps to create and use a budget
Step 1: Calculate your estimated monthly income
Start by listing all your sources of income and the amount you expect to receive each month. This may include paychecks, child support, gig work earnings. Social Security payments, or any other income streams. If your income varies, use a conservative estimate to ensure your budget remains realistic. Here’s an example:
Income:
Paycheck 1: $1.500
Paycheck 2: $1.500
Total Estimated Monthly Income: $3.000
By estimating your income conservatively, you can create a budget that sets you up for financial stability and success.
Step 2: Determine and estimate your monthly expenses
What do you typically spend money on? Begin by estimating your fixed expenses-these are costs that remain the same each month. Examples include rent or mortgage payments, cell phone bills, and garbage collection fees. List each fixed expense along with its amount. Next, identify your variable expenses, which fluctuate from month to month. These might include groceries, dining out. gifts, clothing, and gas.
Estimate how much you spend on these categories monthly. Reviewing past credit card or bank statements can help you make accurate estimates.
Don’t forget to account for annual expenses, such as insurance premiums or subscription renewals. To include these in your monthly budget, divide the total annual cost by 12 and set aside that amount each month. Once you’ve listed and estimated all your expenses, add them up to calculate your total estimated monthly expenses. See the example below for reference.
Example:
Fixed Expenses:
Rent/Mortgage: $1,200
Cell Phone: 550
Internet: $40
Step 3: Analyze your total projected income and expenses, and evaluate
your priorities and goals Next, compare your total expected income with your total expected expenses. If your income exceeds your expenses, you’ll have a surplus. That’s a positive outcome! For instance, in the example above, the individual expects to earn 3, 000andspend2,700 monthly, leaving a surplus of $300.
This is an excellent opportunity to reflect on your financial priorities and goals. What do you want to accomplish with your money-what are you saving or investing for? Budgeting becomes motivating when you can allocate more funds toward your goals and witness your progress. Short-term goals might include building an emergency fund or saving for a trip, while long-term goals could involve saving for a home or planning for retirement.
Once you’ve identified your goals and priorities, decide how much you’ll allocate toward them each month. In the example, the individual plans to save 100monthly foranemergency fundandinvest 200 monthly. Aim to save and invest 10% to 20% of your income. In this case, the person is saving/investing 10% of their monthly income (300/3,000 = 10%).
If your expenses exceed your income, you’ll face a deficit. To resolve this, you’ll need to either reduce your expenses or increase your income. Make adjustments to bring your budget into balance. For example, can you cut back on groceries or entertainment costs? Or could you take on additional work to boost your income?
Step 4: Monitor your expenses
throughout the month and compare them to your planned budget. Create a method to track your spending, and at the month’s end, analyze whether you stayed within your budget. Use this information to refine your budget or modify your spending habits. Were there unexpected expenses? Do you need to add a new category to your budget? Should you increase or decrease allocations for certain expenses? Are there areas where you can cut back? Did you reach your savings targets?
Budgets are meant to evolve. Reflect on whether your spending and saving align with your priorities and goals. Ask yourself, “Am I using my money in a way that truly reflects my values and aspirations?” If you consistently have leftover funds, think about how to reallocate them to accelerate your goals or pursue new ones. Adjust your budget to better suit your needs and ambitions over time.