Five Step to Budget Planning

In 5 Easy Steps, Create a Budget

What’s the first thing that you do when you get your monthly income on the first day of the month? You probably think about managing your budget. Creating a budget is  not a rocket science. When it’s the last time you took a look at your bank statement? The answer may be a loud no for some. In reality, knowing where your money goes and creating financial goals for yourself regularly are key to increasing security in your financial decisions and reaching major life milestones. You don’t need the advice of a financial expert to design a budget for your lifestyle. Simply follow these basic simple steps. For example:

Step 1: Start with your gross earnings.

The first step in building a budget should be determining how much money you have to work with.  Take a look at your net income, which is the amount of money you take home after costs. If your paycheck deducts taxes, retirement, and employer-based insurance, your net take-home pay is your income.

Step 2: Make a list of all the places your money goes.

If you’re not sure where all of your money goes, keep track of your expenses for the next month. Some costs, such as utilities, can fluctuate from month to month. If you have a one-time expense, divide it by 12 to find out how much you’d have to pay each month. The following are examples of expenses:
1: An example of a bill is a rent or mortgage payment.
2: Utilities Insurance (car, private health, etc.)

3: A credit card debt
4: The school’s tuition
5: Cost-cutting
6: An emergency fund
 Other
A: Nutrition
B: Entertainment Clothes (Gas)
C: Supplies for the classroom
Subtract your net income from the amount of all of your monthly costs to work out how much you’re spending on average.

Step 3: Determine your goals and priorities.

Everyone should have an emergency fund on hand. Experts recommend putting three to six month’s worth of expenditures aside just in case. Divide spending into requirements and nice-to- haves. Is it more important to spend that money every month on new clothes or pay off credit card debt?

Step 4: Develop a financial plan.

Everyone’s lifestyle and priorities are unique, this is a fantastic thing. One of the most widely used budgeting systems is the 50/30/20 method. Here’s how your net income is broken down to work out how much you can expect to spend each month. 50% of the budget is allocated to required expenses. 30% of the budget is allocated to required expenses. Contribution to savings of 20% This method has proven to be incredibly beneficial for budgeting rookies. This strategy should be simple to implement because you previously sorted your must-have vs. nice-to-have expenditures in step 3.

Step 5: Keep track of your progress and check in once a month to see how far you’ve come.

There are a plethora of budgeting applications available to assist you to manage your money. Set a reminder on your phone at the same time every month to ensure you don’t forget. A lot of these apps are available for free and can help you save time and money.

Budget Plans

The following budgeting ideas could be of interest to you:

Zero-Sum Budget:

A zero-sum budget is one in which no funds are spent. Every penny you receive goes to a worthy cause. Some may be designated for gas, others for a specific vacation, and even others for debt payback. The rule is that the money coming in must equal the money going out. This budget is suitable for extremely conscientious people.

Envelope Budget

A specific expense category, such as groceries or an emergency fund, should be labeled on each envelope. When you get paid, divide your income into the envelopes according to your preferences from step 3. You’re not allowed to spend any more money in that category until the following month after you’ve spent all of the money in an envelope for the month. For those who prefer to deal with images, this is quite helpful. You can choose a budgeting plan and test it out for a month to see if it works for you. You can also base your budget on your priorities; the choice is yours. If it doesn’t work, try another method until you find one that does.

Conclusion:

There are lots of free financial planning resources available online. The more you know about your money, the more comfortable you will be with saving and spending decisions. Even if you’ve followed the five steps above to construct a budget, there are plenty of free resources available on the internet.

For more tips and tricks, Click here.