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Writing down your budget for the very first time can seem like a very lengthy process, but it can be broken down into bits and pieces for easy progress.
There are just a few basic steps to take to get you started. Everybody needs a breakdown of things to make them less daunting, and budgeting is no exception.
So, here we are to help you out with the breakdown of your budget planning. This article will take you step-by-step through the process to help you achieve the simple and effective monthly budget that you’ve always wanted.
1. Start Writing it Down Even Before the Month Starts
Thinking and planning even before something starts will make your life a little easier. It can help you understand the difference between wants and needs.
One of the easiest things to start with is your recurring monthly expenses. These are things that are due in a fixed amount, every single month.
This step is extremely important. You don’t have to go through the entire process every month, just write it down once and then just tweak a little here and there, and that’s how your budget for the next month is ready.
These amounts don’t change, so this step conquers a big part of your budget process each month.
2. Know the Sources of Your Income
Now that you know what your budget looks like, you need to know if you have enough income coming in to cover your expenses.
For this task, you need to have an income tracker and you need to understand what incomes can be relied upon and what incomes cannot.
While writing down your income, don’t forget to add your side hustle money as well as the different paychecks from other sources that you’ll be getting in the entire months’ time.
Things like cash back and child support, for example, could go in your income category.
3. Know Where Your Income is Going
Now that you have a clear idea of where your income is coming from, you can start thinking about where it is going.
In step one we talked about writing down your recurring, fixed amount expenses. Now you need to write down your other monthly amounts, including your variables.
This includes things like utilities, gas, food, dining out, transportation, date night, cat food, etc.
Once you start writing them down, there will be a lot of expenses that are recurring and a few that will be just for specific months.
Take note of the items that are recurring because they will have to be budgeted for each month. For the ones that seem to be month-specific you need to look at whether or not you need to make some kind of sinking fund category for those items.
4. Be Specific
While doing this process, you should understand the fact that not every month will look the same in your budget tracker, and not every month will have the same income.
You should choose whether to budget by month, or by paycheck, Either way is acceptable.
If you choose to budget by month, keep in mind that you have to be specific month-wise. So, before the month ends and a new month is about to start, you should take out the calendar and start going through the process all over again.
This way you’ll have expenses and incomes written down and that’ll make things easier for you. Once you get these two figures, all you have to do is split them and list it down according to the month.
Once you’ve got a hang of how your budget has to be planned, there are few other things to be mentioned and recalled while planning a budget:
- Track your spending
- Adjustments and alterations have to happen every month
- Save for the large expenses
- Take out time to understand your needs
With the correct strategy and timely listing of your income and expenses, you will be able to create and follow a well-planned budget each month.