Do you cringe or get excited over the word Budget? For many, budgeting can be a struggle as you try to align your financial goals with your spending habits but building a personalized budget can help reduce your financial stress. The biggest question is, how do you start? Here are 5 helpful steps to set your budget this year.
Step 1: List out all your income
You should list all income from every source. If you are receiving rental payments or have two jobs, you will want to list all income sources to evaluate how much you receive on a monthly basis. You should get this number from what you earn after taxes.
Step 2: List all expenses
Look at your expenses on a monthly basis. Reviewing your monthly bank statement could help you easily identify your expenses each month. You will want to make budget categories for each of these expenses. For example, you may have food, home and utilities categories. As you start listing these you can easily identify your fixed expenses which will help you evaluate your fluctuating expenses like groceries and entertainment.
Step 3: Subtract your expenses from your income
After you have everything added up you can subtract your monthly expenses from your total monthly income. Ideally you will want to have some money left over each month to give yourself a buffer or many may apply anything left over to a savings or emergency fund. Some will use the zero-based budget because they will include their savings expenses into their categories, each budget is different and should be established based on what works for you.
Step 4: Track transactions
As you start swiping your card and bills start debiting your account, ensure you tracking this. Many individuals may use a register while others may use app features such as Personal Finance to automatically track it from your accounts. Most budgeting apps allow you to establish your budget categories and will automatically include your income, if tied into your financial accounts.
Step 5: Evaluate each month
When you first start your budgeting journey there will be trial and error, but even the most experienced budgeters know that evaluating your budget each month will provide a better understanding of your spending habits. When you compare month over month you are able to adjust based on the amounts you spent in each category or set a goal for yourself.
While many opt to set New Year’s goals, budgeting doesn’t have to be your New Year’s resolution. You can start budgeting any time of year by following these simple steps. Get started by accessing our digital services and enrolling in Personal Finance Manager today!