The key to alluring needless debts into one’s life is failing to budget. One of the reasons why millions of Americans and billions of other people around the world are unable to save is because they have no control over their finances. Discussed herein, are 3 simple steps that will not only enable you to determine how to draft a budget, but find ways through which you can save.
Keep Tabs On Your Revenues and Expenditures
Establish Your Net Revenue: The first step you need to take towards managing your finances is, determining your average income for a particular month. It does not matter whether you are on a fixed wage bill or are in business and as such your revenues tend to vary from one month to another. The only way through which you can create a workable budget is having a rough estimate of how much money you will earn.
Identify Your Expenditures: What are some of the costs that you have to meet on a weekly or monthly basis? For instance, do you find yourself sitting in a pub with a group of friends at the end of every week having a few glasses of wine and cheese? The moment you establish where your finances are trickling to, you will be able to keep a tab on your income and expenses.
Tally Your Standard Expenditures and Subtract Them from Your Income: What is the final figure? Is it a positive or negative amount? If the final figure is the latter, then you are spending more than you are earning. On the other hand, if the final figure is the former, then classify it into three groups, that is, savings, expenditure cash and flex cash.
Drafting Your Budget
Create a Budget and Establish Financial Objectives: When creating a budget and establishing financial objectives, do it in two ways:
- Short-term: This entails limiting your expenditure to a certain sum of money on a given month. It also entails setting aside a certain sum of cash for savings.
- Long-term: This entails raising a down payment sum for your mortgage. It can also entail raising enough cash to purchase a car. Nevertheless, it is crucial that you have enough money that will enable you achieve your long-term goals.
Create a List of Things Which Need to Be Paid for: Other than entertainment, there are certain things which have to be paid for on a monthly basis without fail. These include rent, insurance, service fee and utility bills.
Utilize a Program: Thanks to the continuous development of internet technology, there are applications accessible in the market that can assist you in drafting your budget such as Microsoft Excel, Quicken and Microsoft Money. These applications consist of tools that will not only aid you in customizing your budget, but keeping track of your expenses.
Sustaining Your Budget
Creating a budget and sustaining a budget are two different things, listed below are means through which you can sustain your budget:
- Do not spend what is not included in the budget.
- Keep a record of your expenses.
- Do not factor in income which you do not have.
Do not use your credit/debit card for making purchases.
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