Creating a budget is simply creating an understanding of how your money flows. It allows you to monitor where your money is coming from and going to. It will produce a vantage point to be able to see if there are areas that could be changed and allow you to work for something that you want or need. There are many ways to do this. Some people have elaborate spreadsheets, others automate it with the use of apps that organize their funds and notify them of how much they are permitted to spend. There are many free apps, or if you have MS office there are free templates included. The only thing that matters when creating your budget is to test it and ensure that it works for you. That it will help you achieve your goals. The basics of all budgets is below.
Add your average cost of living
Add up all of your bills. Include recurring bills like subscriptions, utilities, property taxes, insurance, etc. If it is paid once a year, either make an annual budget that encompasses all 12 months in a year or divide the bill by 12 (months) and add that to a single-month budget.
Track your monthly spending outside of bills and categorize it: Groceries, entertainment, dining out, toiletries, makeup, etc.
Don’t forget to add a spot to save for misc large items and things that may or may not come up. These are things like medical bills, car repairs, veterinary bills, household items like water heaters or a roof that are approaching the end of their warranty. If they break, you will be happy you had the cash. If they do not break you will be happy to have the extra savings. It is a common mistake for people to purchase something with the idea that they can afford the payment and then not calculate in the maintenance.
Add your average monthly income
Find out your monthly take-home earnings after taxes. Suppose you get paid every two weeks then your calculation is:
(Average take-home wages per check) X (# of paychecks per year) / (# of months in a year).
So, if you are paid about $1000 every two weeks your calculation is…
1000 X 26 / 12 = $2166.67 per month.
Subtract your cost of living from your income
Is there any left to save for an emergency fund, retirement, vacation, college? Is there anything you would like to change to have your money work for something else? Review your budget regularly, keep learning and improving, and enjoy ownership of your choices.