Basics of Creating a Budget
Because your budget is the amount of money that you will allocate for a particular purpose, it is important to plan very carefully. You should include in your budget your revenue, total expenditures and capital expenditures over a period of time. A budget will allow you to project future expenses and even save money and time.
Look at where your money comes from and where it goes. If you are already keeping track of your expenses, creating a budget is not a big deal. If this is your first time creating a budget, begin tracking all of your income and expenses for at least three months, recording all your purchases and payments, jotting down your expenses or holding on to receipts. This should even include the mid-night run to convenient store for snacks.
Create categories and write down how much are you spending monthly for every category. Try to keep two main categories of expenses: essential and non-essential expenses, and then break them down in sub-categories. Essential is everything that you and your family need for living such as mortgage payments, utilities, groceries, etc…
Non-essential are those extra things you spend your money on, whatever they might be, and including small items, usually paid with cash where you forget to grab the receipt.
Include all debt, all money put back into savings, and even your children’s allowance and lunch money. After gathering all the information, make a realistic budget, yet one that will be easy to follow.
Be honest with yourself and do not be afraid, since a budget has nothing to do with filing tax forms as many people mistakenly believe. Budgets help people to manage their money by distributing their income in a way that allows them to save money, establish good credit, and even make the money grow instead of increase their debt.
Let’s try an imaginary situation of a couple, John and Jane, both employed, whose total income is $1,200.00 every two weeks, however, John is paid weekly and Jane every 2 weeks.
Although they receive additional amounts as bonus and paid overtime, that money is not guaranteed and is only received from time to time. Budgets are created on monthly basis, on the total combined net income, which will appear on their budget as $2,400.00 monthly and should not include the extra income for budgeting purposes.
However, the assumption of the net income is wrong because of their payments cycle, although this may not be a problem when you and your partner have the same payment cycle.
A person who is paid 52 times a year obtains a net income of $18,200, while the partner is being paid 26 times receives an income of $13,000 yearly. Combining both incomes, the total sum is $31,200 that must be divided by 12 months, yielding an income of $2,600.00, returning $200 a month more than the first-glance amount figured incorrectly.
Then, a preliminary budgeting list to know their monthly expenses may look like this
Utilities . . . . . . . . . . . . . . . . . . 100.00
Telephone . . . . . . . . . . . . . . . . . . 45.00
Groceries ($100.00/week) . . . . . . . . . . – 428.33
Entertainment . . . . . . . . . . . . . . . . 90.00
Weekly Cash ($50.00/week) . . . . . . . . . . – 200.66
Savings . . . . . . . . . . . . . . . . . . – 100.00
Medical . . . . . . . . . . . . . . . . . . – 36.00
Life/Health insurance . . . . . . . . . . . . 150.00
Loan payment . . . . . . . . . . . . . . . . – 25.00
Auto loan . . . . . . . . . . . . . . . . . . 280.00
Auto insurance . . . . . . . . . . . . . . . . 150.00
Auto expenses (gas, etc.) . . . . . . . . . . 100.00
Mortgage payment . . . . . . . . . . . . . . – 550.00
——-
Total Monthly Expenses . . . . $2254.99
Studying the list, they can determine how to apply their money to keep more money free for saving or any other purpose, and even create the budget from a percentage perspective to make it more flexible. We recommend using a loan or mortgage calculator to determine whether or not refinancing would benefit you financially. Furthermore, you can use credit card calculators to figure out how much money you are wasting on interest and other fees. Stop throwing your money away, and learn to live within your means.
By: Elizabeth Culpeppper
About the Author:
Look at where your money comes from and where it goes. If you are already keeping track of your expenses, creating a budget is not a big deal. If this is your first time creating a budget, begin tracking all of your income and expenses for at least three months, recording all your purchases and payments, jotting down your expenses or holding on to receipts. This should even include the mid-night run to convenient store for snacks.
Create categories and write down how much are you spending monthly for every category. Try to keep two main categories of expenses: essential and non-essential expenses, and then break them down in sub-categories. Essential is everything that you and your family need for living such as mortgage payments, utilities, groceries, etc…
Non-essential are those extra things you spend your money on, whatever they might be, and including small items, usually paid with cash where you forget to grab the receipt.
Include all debt, all money put back into savings, and even your children’s allowance and lunch money. After gathering all the information, make a realistic budget, yet one that will be easy to follow.
Be honest with yourself and do not be afraid, since a budget has nothing to do with filing tax forms as many people mistakenly believe. Budgets help people to manage their money by distributing their income in a way that allows them to save money, establish good credit, and even make the money grow instead of increase their debt.
Let’s try an imaginary situation of a couple, John and Jane, both employed, whose total income is $1,200.00 every two weeks, however, John is paid weekly and Jane every 2 weeks.
Although they receive additional amounts as bonus and paid overtime, that money is not guaranteed and is only received from time to time. Budgets are created on monthly basis, on the total combined net income, which will appear on their budget as $2,400.00 monthly and should not include the extra income for budgeting purposes.
However, the assumption of the net income is wrong because of their payments cycle, although this may not be a problem when you and your partner have the same payment cycle.
A person who is paid 52 times a year obtains a net income of $18,200, while the partner is being paid 26 times receives an income of $13,000 yearly. Combining both incomes, the total sum is $31,200 that must be divided by 12 months, yielding an income of $2,600.00, returning $200 a month more than the first-glance amount figured incorrectly.
Then, a preliminary budgeting list to know their monthly expenses may look like this
Utilities . . . . . . . . . . . . . . . . . . 100.00
Telephone . . . . . . . . . . . . . . . . . . 45.00
Groceries ($100.00/week) . . . . . . . . . . – 428.33
Entertainment . . . . . . . . . . . . . . . . 90.00
Weekly Cash ($50.00/week) . . . . . . . . . . – 200.66
Savings . . . . . . . . . . . . . . . . . . – 100.00
Medical . . . . . . . . . . . . . . . . . . – 36.00
Life/Health insurance . . . . . . . . . . . . 150.00
Loan payment . . . . . . . . . . . . . . . . – 25.00
Auto loan . . . . . . . . . . . . . . . . . . 280.00
Auto insurance . . . . . . . . . . . . . . . . 150.00
Auto expenses (gas, etc.) . . . . . . . . . . 100.00
Mortgage payment . . . . . . . . . . . . . . – 550.00
——-
Total Monthly Expenses . . . . $2254.99
Studying the list, they can determine how to apply their money to keep more money free for saving or any other purpose, and even create the budget from a percentage perspective to make it more flexible. We recommend using a loan or mortgage calculator to determine whether or not refinancing would benefit you financially. Furthermore, you can use credit card calculators to figure out how much money you are wasting on interest and other fees. Stop throwing your money away, and learn to live within your means.
By: Elizabeth Culpeppper
About the Author:
Elizabeth Culpepper is a staff writer for Direct Lending Solutions
Samuel Wannamaker