Whether you are looking to tackle your mounting debt or just plan for your family’s “big picture” expenses, it all starts with a budget. If you have never formally created a budget before, here are a few simple steps to get yourself started.
- Print out a budget worksheet: having a template to work from will make this process a lot easier for you. You can find budget templates in Microsoft Word or by searching online.
- List all of your income: make note of all your sources of income, this includes: jobs, alimony, child support, etc. Even if you make a bit of extra money on the side doing small jobs or selling things online, make note of this in the budget as well. For people who are self-employed, it works well to just use an average of your monthly income.
- Tally your expenses: try to make a complete and total list of all the expenses you have each month from fixed (mortgage, taxes, car payments, television, etc.) and variable (groceries, utilities, phone, etc.). Again, try to estimate or pick averages, but you can use your bank statements as a tool to make calculated guesses.
- Define your net income: what money is left from your income after all your expenses are paid each month is your net income. You definitely want this to be a positive number, so you can put funds towards debt repayment. If this is negative right now, make a bold note of it and skip to the next step.
- Make adjustments to spending: doing a budget is great for defining exactly where all your money is going each month. Once you know what you have been spending on, you can adjust your habits accordingly. Some ideas for reducing monthly spending would include cutting down on cable packages, cancelling memberships you don’t use or doing a ‘wants vs needs’ analysis.
Another trick for understanding your household spending habits is to download a spending tracker app and write down every purchase you make in a month. This is the best way to know exactly how much money is spent (or wasted) each month.