- Determine Your Income – That’s the first thing you must figure out. Your income is not what your boss pays you or what you earn if you work for yourself; it’s what you have left over after all mandatory paycheck deductions like taxes and insurance. After all, you cannot budget what you do not have. Getting this figure right will really help.
- Add Up Your Expenses – This may take longer if you’re in debt or you have a lot of expenses you didn’t realize you had. The best way to do this is to open your bank account ledgers and write down your expenses for an average month. Be sure to note which ones are fixed or flexible, plus which ones are essentials, and which are non-essentials. For this exercise, you can consider any contracts to pay something to be essential, since you cannot just stop paying even if it was frivolous at the time.
- Add Up Your Debt and Create a Payoff Plan – For your credit card debt and other revolving credit like store cards, add them up, note the interest you pay, and note the minimum payment due. Set up a payment plan to pay off the high-interest cards first while you pay minimum payments on the others. Then add that money into the payoff for the next card on the list
- Create Financial Goals and Plans – What do you need money for in the future? Would you like to have the ability to retire early or at least at 66? Are you investing anything for those goals? Even if your only goal right now is to pay down consumer debt and eat healthily, that’s okay too.
- Use Software to Help – Some banks offer online software to help with budgeting. Check your bank’s online area for that software. If you cannot find something like that, ask your bank or credit union if they offer it because you may just not know where to look. Using your bank’s software will be beneficial since everything comes from that account.
- Check Up Daily at First – Once you set up your budget, do a daily check to ensure you stuck to it. For example, you may not think it’s a big deal that you impulsively bought that coffee today from the expensive coffee shop, but that can add up. Even if it’s just 5 bucks five days a week, by the end of a year that’s 1300 bucks. You could go on a nice vacation for that or pay off a credit card.
- Be Realistic – When you are creating your budget, be realistic. Just because you want to go on vacation to Europe next year doesn’t mean you can. Just because you want to pay off $30K of debt in a year doesn’t mean you can. You can only deal with the reality of the money you have. Living within your means is a lot more satisfying than you think. If you want to be able to live differently, find a way to make more money.
- Find Money-Making Opportunities – If your income is too low to support your goals for the future, then you’ll need to find a way to make more money. You can do that in several ways today, from delivering groceries, to driving for a rideshare company, to having a garage sale. It’s up to you, but if you need to boost your income to have a good budget, then you are going to have to find a way.
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