Many people don't think about how important it is to have a budget. They spend all the money they make and don't have any money set aside for emergencies. Most of the time, this leads to getting into debt, and sometimes even bankruptcy. A budget can help to avoid these things.
The most important things to figure out in a budget are income and expenses. The goal of a budget is to make sure that your spending doesn't go over your income and to set aside money for the future.
A budget should be written down in a chart or table. This needs to be easy to understand and give a quick summary of the important information. The chart needs to show the different ways that money is spent. Housing and utilities, entertainment, health and beauty, transportation, communication, and household are some ideas for headings. These can be broken down even further as follows:
Homes and services
- Mortgage payment or rent
- Insurance
- Taxes and the power bill
- Natural gas
- Water and trash collection
Entertainment
- Cable or satellite service for TV
- Internet access
- Dining out
Bars and clubs
- Games, parties, lessons, and performances
Wellness and Looks
- Hair-cuts, perms etc.
- Make-up
- Products for health, dental, vision, weight loss, and dieting
- Nutritional supplements
Transportation
- Car payments, insurance
- Gas
- Routine maintenance, repairs
- Air travel
- Rental cars, public transportation
Communication
- Calling
- Cellular phone
- Voice mail
Household
- Groceries
- Items for cleaning
- Dry cleaning and laundry
- Home improvement
Things to do, towels, and sheets
Others
- Paying with a credit card
- Payments for other loans
- Items for children, babies, and the elderly
- Money for kids, book clubs, magazines, music, etc., fast food
- Investing, spending money, going on vacation, giving money to church or charity
- Gifts (Christmas, birthdays, anniversary, etc.)
- Fund for bad times
- Cigarettes.
You could add to the list any other costs that aren't already covered.
Next, try to make a monthly calculation that includes all of your costs. For example, if you pay taxes once a year, divide the yearly amount by twelve to find the monthly cost. After you've done this, add up all the numbers to get the total cost for the month. Then, take this amount away from your take-home pay. If the rest is negative, you should look for expenses that you can cut back on. For example, if you bring home $1,000 and your expenses add up to $1,150, you would need to cut $150 from your expenses every month.
If you want to spend less money, you are the best person to decide where to make changes. But it would be smart to cut back on the extra channels that you pay for on your TV. If you smoke, try to smoke less instead. Bring a lunch from home to work instead of eating fast food. Save money on electricity by not using the air conditioner or heater when you don't need to, and by using the phone less.
Making a budget is a must if you want to keep track of your money, and it doesn't matter how much money you make. It keeps track of your income and spending so you don't spend more than you have and end up in debt.
