The term “Budget” is as well known as the word “diet”.
A lot of people actually understand that both need careful attention, but they dislike the idea of both words.
Budgeting reminds a person of saving pennies, clipping coupons and mealtime consisting of instant ramen and cold leftovers.
Making a budget and following it actually might be one of those enabling tasks that we perform.
Creating a budget allows us to focus our attention on economic matters with precision enabling us to settle our debts, guard our credit, finance our retirement plans and save our money to purchase properties like cars and houses.
Budgets are the pleasant restraints that we need to allow us to live fully since it makes us capable of determining how much cash we are actually earning, where we spend it, where it will be allocated and when we have the very much appreciated excess money.
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Don’t worry, making a budget that’s simple to make sense of and (fairly) easy to follow is not as difficult as you thought, especially with so many great free budgeting apps that you can install on any device.
Below are five fast steps to help you start making the first budget that you can stick to:
Table of Contents
1. How much cash do you have coming in every month
Does this seem obvious?
But you might be amazed at the number of people who have an unclear idea of the very necessary budget component—the net income.
The initial phase in creating a budget that’s effective is to know how much money you expect per month.
Adding up all sources of income net of tax reveals the amount of money you will work around on gives an outline on how to adjust expenses, helps determine a realistic goal for saving money and prevents shortage of funds.
2. How much do you have to spend on bills every month
The second step is to determine how to fix the monthly expenditures. Expenses usually can be categorized into two- Fixed and Variable.
Knowing how these two are different is necessary.
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Fixed Expenses
Some expenses are often the same or only vary a little every month ( think of overhead costs such as payment for house rent or car amortization).
While fixed expenses can be decreased through longer term strategic selections, for the objective of creating a good budget, these fixed expenses are steady and certain.
