One of the most essential steps involved in staying on top of your personal finances is coming up with a thorough budget. While many people often struggle to create an accurate budget, the truth is that it really isn’t that hard if you know the basics.
Assuming you are looking for a place to start budgeting your personal finances, these basics should set you on the right track:
- Track all expenses – large and small
Make it a habit to track all your expenses, both large and small. It might prove helpful if you use an app for doing so, but you can just as easily get by if you collect and save all your receipts and track them daily. Some people like to spend only using their credit card so that they can review its statement and track their expenses – but that is often less than ideal as you won’t be able to update your budget regularly and it won’t be that detailed.
- Be as detailed as possible about your expenses
As you start to track all your expenses, you should try to be as detailed as possible. For example you shouldn’t just keep track of the fact that you spent $100 at the supermarket – but you should instead break it down into how much of it was spent on groceries, household supplies, and so on. The more detailed your budget, the better you’ll be able to identify and trim out any unnecessary expenses if needs be.
- Start estimating the range of your monthly expenses
It is important that you track your expenses early as then you can use that information to estimate the range of your monthly expenses. For some fixed expenses there will be no need to do so, but for others (i.e. groceries, utility bills, etc.) you should be able to identify a rough range under which these expenses fall.
- Figure out how extra can go into savings or repaying debts
Based on your range of monthly expenses you should be able to figure how much of your income will be left over – and you can use that for building up your savings or repaying your debts. Although as a rule of thumb it is best to repay your debts as soon as possible, in some cases you may want to build up an emergency savings first.
- Tackle debt if it is a problem
However, you may run into an issue if you are unable to meet your debt repayments based on your budget. If that happens, you should look to actively deal with it, by cutting expenses where possible and maybe even pursuing other options such as credit card debt settlement.
That should cover all the basics that you need to know about budgeting. As you can see, it really isn’t that complicated, and if you are proactive about it you should be able to come up with a thorough and accurate budget after a month or two of tracking your expenses.
Article Submitted By Community Writer