Having an expert knowledge on how to do a monthly budget is something that you must have if you want to get rich. Before that, it will help you pull yourself out of piles of debt. Also, developing a very strict system will totally cut your impulsive purchases.
The result of having an effective monthly budget is nothing but a better financial status. So if you want to breathe easier, do a monthly budget. If this is the first time that you’ve heard about that, then here is a good opportunity that you give yourself. Learn on how to do an effective monthly budget by checking on the below steps:
Count your money
The first thing that you must do before you can start budgeting is finding out if there is money to budget. Know how much you have for the month and you can do this by calculating your monthly income with your current employer. You can add your earnings from your part time job and other sources of income such as alimony.
Make a list of expenses
This involves a list of things and services that you usually buy and it also includes things that you are planning to purchase. You still need your pen and paper on this process. Use MS Excel if you want the organization to be a lot easier and if you are planning to use the same data in the future.
Categorize your expenses by listing them all down. Start from your biggest expenses and end the list with the smallest ones. From your created list, create two more lists that will determine which of the expenses are essentials and which are not. The examples of items to be listed under essentials are rent payment, electricity bill and gas. For those that are not, good examples would be wines, new gadgets, movies and cigarettes. Let’s name these unnecessary items as extras.
Trace back the cost for expenditures
Find your previous invoices and add the amount next to the corresponding expenses. This is where you’ll see how much you are spending for your needs. It will also give you regrets about spending a lot of money for things that you don’t actually need. Get the total amount for both categories and proceed to the next step.
Make some changes if necessary
Get your total income and deduct all the necessary expenses. If you came up with a positive result, deduct the extras from it. If you still came up with a positive result, this means that you are spending within your budget and that is good. Otherwise, it only means that you are spending more than what you earn and there is nothing left for you to save.
If your expenses are higher than your income this would lead you to a credit card debt or something of the same kind. To fix the problem of going over budget, check on the lists again and look for things that you can eliminate until your expenses fits the budget.
Follow these steps and solve your monthly problems of debt and running out of money before pay day. You can also develop this to a more effective budgeting system like eliminating all unnecessary expenses to save money. These good practices will really help you out not only on your spending but also on attaining financial freedom.