How to Make A Realistic Budget
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There are numerous theories out there on the best way to make your own budget but the clearest, most logical we’ve found in a long while comes from the Financial Planning site at About.com. It involves gathering a fair bit of information and spending an hour or so collating it, but it sounds like it will make a realistic budget that you can actually use to help you save money or get out of debt. The main steps are:
- Gather together every relevant bit of paper - bank statements, household bills, income information and so on. You aim to create a monthly average which means that the more you can gather the better, to average in payments that you may only make once or twice a year.
- Calculate your total income from all sources, including your job, investment income or anything else, and make a monthly average.
- Calculate your total expenses over the period of the paperwork you’ve gathered (or longer if you know of other important payments) and figure out the monthly average.
- List all your expenses, dividing them up into fixed and variable expenses.
- Total up your monthly “profit or loss”, and hope that it’s a profit. If not, you’ll need to figure out some changes to your budget immediately. If you do have money left over, you must decide where to allocate it - for example to an emergency fund, or to a retirement savings plan.
- Adjust expenses where you can to save more money.
- Every month, sit down and review your budget. It only takes a few minutes but can save you a lot of money.
This entry was posted on Monday, January 19th, 2009 at 2:26 am and is filed under Budgets & Money Management. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
