A Budget? How to Create One and Stick to it!

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It’s actually pretty easy to get started:

Write down your monthly income. Include the take-home amount on your paychecks and any other money coming in, for example, child support or income from a second job.

List and total your monthly expenses.

  • Fixed expenses: Rent or mortgage, car payments, student loan payments.
  • Fluctuating expenses: While these costs fluctuate from month to month, they can be budget drainers.  Think about how much you spend on your utilities, gas, groceries and look back to past months’ statements to actually determine how much you are spending on these items.
  • Discretionary expenses:  Daily latte? Clothes? Dinner out?  Entertainment.  Same as the fluctuating expenses, don’t guess how much you’re spending here, actually find out.

Set a savings goal.

  • List and total annual periodic expenses and then divide it by twelve to determine your monthly average.  This should include expenses like car maintenance, holiday expenses (gifts and travel).  Transfer the monthly amount into your savings for use as necessary and safe-keeping.
  • Set a goal of how much to save in addition to your periodic expenses.  This can be as low as 2% or higher if you have more flexibility.  The amount is less important than the habit of saving some amount regularly.

Set a debt pay off or pay down goal.

  • Always pay more than your minimum.  Set your goal so that you are actually paying down the debt principle and not just meeting the interest.  This goal should actually move your debt toward a zero balance.

Now that you have a good sense of your financial status, you can start to build a realistic budget.  Is your monthly income less than all of your expenses, savings and debt reduction goals? Adjust your spending accordingly and aim to live within your means.  This doesn’t mean that you will be denying yourself any fun for forever, you just have to make different choices where you can.  If your monthly income is greater than your expenses, then concentrate on increasing your savings or paying off your debts.  You never know when your circumstances might change.

Budgets can seem like a big downer but the power of your budget lies in the information it provides you.  They put you in control of your money.  They give you the freedom to make choices to attain your goals.  And, with all the extra spending flexibility you will create once your debts are paid and savings increased, you can treat yourself on occasion!

If you want to learn more about taking control of your financial freedom, paying down your debt, increasing your savings and creating a budget that works for you, find a local credit union here or at asmarterchoice.org.  You can see a list of credit unions you are eligible to join and can set up an appointment to talk to one of their money experts!

The original article appeared on Bankziety.com

 

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