Living within your means and planning a monthly budget is essential to staying out of debt, building a nest egg and preparing for emergencies. But where do you begin? MyLoanAdvisor has offered the below budgeting advice to send you on your way to saving more, spending less and getting out of debt.
Steps to creating a budget:
1.) Gather all forms of income
Anything that shows money coming in should be included: investments, employment, child support, benefits, Social Security, etc. This will help you find a monthly average income.
2.) Gather all expenses
Your expenses will include utilities, mortgages, auto loans, groceries, gas, etc. The total of these will give you your monthly expense amount.
3.) Divide your expenses into a Fixed or Variable category
Which expenses are necessary and which can change? Fixed expenses are vital to your every day life and will remain the same month-to-month. These include your mortgage, utilities, auto loans, trash pick-up, cable, etc. Variable expenses are the amounts that change on a monthly basis such as your grocery shopping, gasoline, eating out, and entertainment. The variable expenses will be your main consideration when making changes to your spending and savings.
4.) Total your expenses and income. Do you have more expenses than income or vice-verse?
If your income is higher than your expenses allocate a monthly amount to put into a savings account or towards larger payments on your mortgage, car loan, or credit cards to get out of debt faster. If your expenses exceed your income changes will need to be made to your variable expenditures to change the proportions of your budget. Spending more than you receive may cause a quick onset of debt.
5.) Make adjustments based on your results.
Continue to check on your monthly income and expenses to see where you are needing to improve and where you are doing well.
Bankrate.com offers a very helpful budget calculator if you need further assistance.