Many people are facing a hard time when it comes to creating a budget. Did you know that more than 50% of American households do not prepare a budget? However, preparing a budget will really help improve your financial situation.
It does not really matter how much you earn but how you spend your money so budgeting is so important. It will help you control your finances.
What makes budgeting important?
Managing your money better can save you from financial stress like debts and loans. Keeping track of your income and expenses will help you be mindful on how you should spend your hard-earned money. Having a monthly budget means being responsible with your finances.
It will take some time before you master it but it will be worth it. Many people have paid their debts and has savings because of responsible budgeting.
Create a Realistic Budget
Track your income and spending so you know where your money comes from and where it is going. Keeping receipts, transaction slip will be helpful.
You should record every single transaction that you do. You can use mobile apps, software or just simply write it in your notebook. In this way, at the end of the month, you can track your spending.
Income and Expenses are the one that are closely monitored in budgeting. Income can come from different sources like your day job, part time job, etc. they suggest that you should include your regular income in budgeting. Do not include bonuses because you will never know if you will have it every month. Remember, we are creating a realistic budget so bonuses should not be included.
Expenses are everywhere. Writing your expenses will make you realize that there are things that you really do not need and there are things that needs to be prioritize. Below are the list of expenses that are commonly included in someone’s budget:
- House mortgage, rent or maintenance
- Car insurance, gas, and monthly payment
- Cable and Internet
- Health insurance
These are the most common things where you spend your money. You may include other things depending on your lifestyle and preference.
Track your income and spending electronically or manually. It does not matter as long as you are comfortable with it.
Make budgeting a habit because it will help you in taking care of your money. It will also give you a peace of mind because you know where your money is going. Go over it on a regular basis and feel free to change and update it from time to time whenever you want.
Budgeting is awesome and if you did it right, it makes your financial dreams a reality. There are people spending $50 on coffee alone but they did not realize it until they keep track of their expenses. There is really a big advantage when you know where your money is going so you can modify your spending if needed.
Just remember to be realistic about everything.