Five Ways to Create a Budget You Can Live With
August 26, 2021
What can a budget do for you? A budget helps you manage your spending, track your expenses, and allows you to save more money. It can also help you be more prepared for emergencies, reduce debt, and remain focused on your long-term financial goals. But how do you create a budget you can live with? Here are five ways to do so.
1. Know your income
To create a budget, first list all of the income you receive each month, including from a full-time job, and any other revenue you earn.
2. Know your debts and expenses
Then, add up all of your expenses and monthly debt. These may include:
- Rent or mortgage
- Phone and cable
- Health care expenses (including insurance)
- Credit card debt
- Auto loan payments
- Entertainment costs (i.e., meals out, traveling, and movies)
- Clothing and accessories
Next, take your added up debt and expenses and deduct it from your monthly income; the remaining amount is your household net income every month. These funds can be saved or used to pay down debt.
3. Determine where to reduce expenses
If you identify a need to pay more toward your debt, save more or start an emergency fund, the best way to do this is to see where you can cut costs in your budget — especially discretionary spending. This may include buying a new outfit, eating out several times a week, or paying for gym memberships or subscriptions you no longer use or need.
4. Discover ways to add to your income
In the same way you look to reduce expenses, you may want to add to your income by working part-time, doing freelance work, or refinancing your home or auto loan for a lower interest rate.
5. Set financial goals
Finally, now that you have budget, you can establish financial goals such as paying off high-interest debt or student loans, starting an emergency fund for unplanned expenses, or saving for a trip or a down payment on a new home.
Many financial institutions offer sub-saver accounts and allow you to set up automatic transfers to make saving easier.
As you put your budget together, keep in mind your goals and priorities may change, so be flexible. For example, if you are working from home more now, you may need to reduce the amount you budgeted to spend on gas, or add funds to your cable costs because you need a faster internet connection.
The bottom-line is you should make your budget work for you, and be adaptable to your goals and dreams.
Tags: Budgeting, Money Management, Savings