The simple’s act of jotting down on a paper, app, in a spreadsheet, or on a website – how much money do you think is coming and how much of your money is going out can really make a big difference while talking of managing your finances and budget.
It can assist you in avoiding complete waste of the things such as overdraft penalties and late fees etc. It will aid you in identifying where you can save your money without any painful cuts. And, in the course of time, it will empower you to spend lesser than you earn so that you can save for your future.
The short-term goals must be to trim down your total spending to around 90 percent or even lesser of your total earnings or income.
Here are the steps that you must take in order to build a better budget for yourself:
- Pile up your total earnings or income
- Keep a track on your monthly expenditure
- Do not forget little things
- Be ready to face the unexpected
- Look for the items that you can cut
- Get high-tech assistance
Pile up your total earnings or income:
Summate your monthly after-tax salary for your family. If your earnings vary based on the number of working hours, then you must sum up your monthly total income for some months so that you can compute an average of it. But, remember that you do not include the money that you cannot be sure you will receive, like tax refunds, or year-end bonus.
Keep a track of your monthly expenditure:
Jot down all your regular occurring expenditure in a form of a list such as groceries, internet, TV services, phone bills, car payments, rent or mortgage, utilities, child care, insurance etc. Maybe you are paying off your outstanding home equity loan, a student loan, or a credit card debt. Sum them up to ensure the money you are earning is more than that of what you are spending each month.
Do not forget little things:
You might still do an astronomical amount of expenditure that is hard to put into a large monthly bucket – money, as it may be, that you draw back money from the ATM and pay out on mundane needs and requirements. Kick off with keeping a sharp vigil on your cash flow and maintain a journal of your expenditure for the remaining weeks of the month.
Be ready to face the unexpected:
Usually, the unexpected expenditures that can let your budget go of the rail are not really so abrupt. Holiday gift for the teacher of your child? It an activity that takes place every year. Getting a call on request to purchase stuff for charity events? You know you cannot deny. Since you can tally on a parade of such recurring one-off expenditures, project a moderate estimate for the year and incorporate it into your budget.
Look for the items that you can cut:
If you are paying out more than your income or earnings, crafting a full-proof budget will help you in finding places to cut the unnecessary expenses. As it may be, you can cancel your monthly subscription to some premium cable channel or expensive gym. You must wait until such expensive things go on sale and you buy them, turn down your thermostat in winters and put it up in summers, and while paying off your car, do not, at once, exchange it for a new one.
Get a high-tech assistance:
A personal finance programme such as Quicken, or a website or an app such as Mint, has made up tools, which can assist you in creating a budget. With several services like these, every time you make deposits, writing a cheque, paying credit card bills or dispatching electronic payments you are asked to accredit it to a specific category. And if you are into online banking, then you can download the deposits and payments made by you directly from the banks rather than writing them by hand.