Learn how to create a budget in four easy steps that will work for any financial situation, even yours. A well formulated budget will help you solve many of your financial problems in life such as excessive debt, lack of savings, inability to go on vacation, or no room for an emergency allowance during a given month. Most of all, a good budget will help you achieve your goals and dreams in a timely manner.
Even if you think you have everything together with your finances, you should definitely have a budget. This valuable tool not only guides you in the right direction, but it will also help you identify problems with your finances and keeps you from missing important payments for money you owe to other people.
A budget is a very simple tool to create. All you need to know is all of your income, expenses, and what you want to do with anything left over and you have a budget.
The Four Steps on How to Create a Budget:
1. Determine Your Current Financial Situation. Your current financial status will pave the way for your new budget and financial life. You must know where all your money is at all times. You must know your income, your expenses, your savings, your investments, and how much you have in case of an emergency.
Knowing how to create a budget starts with determining where all of your money is. Simply by putting all of your income and expenses on a sheet of paper, doing some simple math, and whatever is left over is what you apply toward your goals and dreams, paying off debts, or acquiring more sources of income.
A budget should be split up into certain percentages, which helps regulate your spending a little better. Your fixed expenses should be no more than forty-five percent, your variable expenses should be fifteen percent, your budget expenses should be twenty percent, and another twenty percent should be allotted to your goal savings and investing.
2. Analyze Your Budget. Once you create a budget and determine your current financial situation, you must properly analyze it to see what changes you need to make in order to reach your future financial goals.
Your budget numbers say a lot about your life. Most people will find that they have too much debt. Others find that they live paycheck to paycheck just because they spend too much on their budgeted living expenses.
One tool I have for effectively analyzing a budget is called "Six Step Troubleshooting for Your Finances". This is a unique approach to fixing problems when you learn how to create a budget.
Maybe you want to pay off debt, buy a new car, buy a house instead of rent, or go to college. Whatever it is you want to do, you must analyze your current situation to see if you budget supports you achieving your goals and dreams. If it is not, then you need to make some adjustments. But that happens in a bit; right now is just seeing where potential problems lie.
This is where you determine if you are over spending in areas where you could be saving money to apply toward your goals. This is an ongoing process, just like when you create a budget. Once you are finished creating a budget, you must continue projecting it out forever to maintain the same amount of financial discipline throughout your life.
how to create a budget for steps 3 and 4 to help get you down the right road to budgeting success.