How to set up a budget and why you need to do so?
You need a budget if you want to know how much you are earning and spending and where you money is going to.
Setting up a budget helps you make wiser choices, reduce unnecessary expenses, and also save money.
- Do you know how much money you earn and how much you spend each month?
- Do you earn more than you spend?
- Do you know where your money is going?
These are questions you should ask yourself in order to establish a personal or family budget, and keep track your earnings and your expenditure.
Establishing a budget can help you keep track of every amount of money that comes in or goes out, and helps you save money and reduce expenditure and debt.
A personal or family budget provides understanding of your expenses, and how you can reduce them. It helps you manage your income so it meets or exceeds expenses.
8 Tips for Establishing a Budget
“Budgeting has only one rule: Do not go over budget.”
– Leslie Tayne
Here are a few simple tips, anyone can follow, to track the amounts you earn and spend, set a wise budget, and have more control over your money.
1) Sum up your expenses
Start by summing up all the expenses of last month and compare the amount to the amount you earned.
If you earned more than you spend that’s great, but if your expenses were higher than your earnings, consider this as a red flag, warning you to rectify the situation.
2) Make expense lists
Divide your list of expenses into two lists, one list covering fixed bills and expenses on clothing, transportation, services and food, and another list for other expenses, such as entertainment, restaurants or vacations.
Find out where you can cut off, where you can postpone the purchase, and which of these expenses are not really necessary.
3) List of intended purchases
Make a list of what you intend to purchase in the next six months.
Can you take out of the list anything? Are all items really necessary?
Take off from your list what is not so important, or find ways to earn more money.
4) Track the amounts you spend
Keep track of every amount of money that goes out from your account.
Are all expenditures necessary?
Can you cut out some of them? Are you spending more than is necessary on your insurance, food, clothing, gas, electricity, telephone or other services?
You can always make a survey and shop where it is cheaper.
5)Find out where you can save money
You can invest your money in a saving account or a retirement program.
No matter how much money you earn, it is important to put some money aside, which you could use on a rainy day.
6) Monitor your expenses
Always remember to control and monitor your income and expenses.
Be alert and know that your budget will change from month to month, so you will have to review it and make adjustments.
7) Be honest with yourself
Be as as accurate as possible when estimating your expenses. Don’t say it doesn’t matter, it’s a small amount, or I can’t live with this or that.
8) Sticking to the budget
Remember, establishing and sticking to a budget requires common sense, and discipline.