In this economy, more people have realized the benefits of becoming more careful with their finances. It’s vitally important to understand your income and spending, both so you can plan for the future and so you can set up saving and investments for retirement. If you have been putting off assembling a personal budget, here are some tips for making one and sticking to it.
- Be honest about your income. The first step to any budget is to collect all of the money that is coming into your house. If you receive a regular paycheck where taxes are deducted, make sure to use the net, or take-home pay. This is money that you have control over.
- Understand your expenditures. This is one of the biggest problems many people have when it comes time to create a budget. Every single penny you spend needs to be accounted for – housing, utilities, gas, food, and more. The best way to get a clear picture of this is by using bank statements from the last 6 months and creating a monthly average.
- Find your wiggle room. Once you have compared those two numbers, you will have the disposable income that your household has access to. The idea now is to increase that number by cutting costs and investing or saving as much of it as possible.
- Don’t sweat the unexpected. Medical crises, family emergencies, or other events can cause even the most tightly-structured budgets to fall apart. If that happens, take a day to rework your plans and make a schedule to get back on track for saving when you’ve dealt with the unexpected expenditures.