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Creating a monthly budget may not sound like the most thrilling of activities, but in actual fact, it’s a great way to give yourself more financial freedom. That financial freedom is the key to a lot of good times for you and your family!
If you want to make a budget and take back control of your finances, read on for some top tips.
Gather as much information as you can
The first step when creating a household budget is to get as much information together as possible.
Make sure that you have access to your bank statements so that you can see what you are spending each month, and also gather together things like:
- Investment and savings accounts.
- Utility bills.
- Credit card bills.
- 1099 forms.
- Mortgage statements.
- Loan and credit card statements.
Calculate your income
Based on the information that you have gathered, calculate your monthly income. If you are a salaried employee, then this is reasonably simple – you can use your take home salary for this.
If you are self-employed, it’s a good idea to look at what you earned over the last 12 months and try to come up with a monthly average as your income figure.
You should also include any additional income from freelance work that you do in addition to your regular work, child support and alimony payments, and social security payments.
Calculate expenditure
Next, calculate your monthly expenditure. You should include the things that you absolutely have to spend on every month such as your bills, but also include things like eating out and day trips. Just because you’re calculating a budget doesn’t mean that you’re going to stop wanting to have fun, and trying to force yourself to live to too strict a budget is asking for trouble.
Things like rent and mortgage payments and utility bills are reasonably easy to calculate as they remain the same each month.
If you have a lot of different loan and credit card payments that are difficult to keep track of, an option is to take out a loan for debt consolidation, which will consolidate some or all of your repayments into one payment. If you choose a good consolidation loan, you may even find that your monthly payment amount is less than it was before, as consolidation loans may have lower interest over a longer period of time. This gives you the opportunity to use the additional money to pay off the debt amount, and get it cleared more quickly.
There are some great budgeting apps available. They will help you to keep track of what you’re spending each month, which you can then feed into your budget.
Making adjustments
Once you know your total income and your total expenditure, you are in a good position to start taking some control. If you find that you are spending more than you are earning, then take a look through your budget and work out where you can make cuts.
It’s also a good opportunity to start looking for places that you can save money, for example, by starting to overpay on loan repayments or by putting money into a savings account to earn interest.
