Basics of Perfecting Your Budgeting Skills

(FinancialHealth)- Many people think that you need a doctorate in finance to master budgeting. But you’ve always been doing some form of budgeting without even realizing it! Remember when your parents gave you a couple of dollars to buy some ice cream? As soon as you walked into that store, you knew that your money would only be enough to buy one ice cream cone, not a banana split or a king-sized ice cream cake. That’s the essence of budgeting. Using your skills to maximize your benefits, while using minimal resources. We face these types of decisions every day.

If you find yourself constantly facing deficits and debts, we’re going to show you how to create a budget that’s easy to follow. Just follow these steps and you’ll never have to stress out about creating a budget ever again.

Step 1: Get the Budget Sheet That’s Right For You 

Getting the right budget sheet isn’t too challenging. You’ll find plenty of nice, visually appealing templates for budget plans on the internet. Choose one that you feel you’ll be able to easily follow. Excel and Google Spreadsheet are also great tools for creating a comprehensive budget plan.

Step 2: Put Your Income into the Equation

Now, it’s time to list all sources of income that you are currently using. This can include your paychecks, the profits from your investments, and any cash that you have on the side due to freelance jobs. If you’re married, it’s also important to ask your spouse about his/her sources of income. Add it all up and see what you get!

Step 3: Make a List of Expenditures 

Listing your monthly expenses may be a little trickier than it sounds. Every month you’ll have two types of expenses. There are regular bills or costs that have a fixed amount, such as your phone bill or paying installments on a loan. In addition, you’ll have expenses that don’t have a fixed rate, so sometimes you’ll have to make a calculated prediction. For instance, you might need more groceries this month than you did during the previous month. What you could do is look at all your old receipts to determine what you typically spend.

Step 4: Determine Your Net Income

Once you’ve made sure all the data is accurate, then you are ready to determine your net income. Basically, your net income is what’s left over after you’ve subtracted all the expenses from your total income. If it’s a positive number, then that’s good. You should try to work towards putting 20% of your total income aside. If your net income turns out to be a negative figure, then you need to reduce your expenses. Generally, what you should try to do is work towards following the 80/20 rule, which is where you only use 80% of your income for monthly expenses.

Step 5: Too Lazy? Just Download an App! 

For those who don’t like all the math involved in creating budgets, let the apps just do the work for you! Luckily, these days there are many budget apps to choose from. Though it might be best to try a couple different ones to see which one works best for you, here are a couple of suggestions:

  • PocketGuard is something you’ll never regret downloading on your phone. It makes managing your money easier than you could ever think!
  • Mint is also a great app with some great visuals. It also has a great security feature, which allows it to notify you of suspicious transactions.
  • Personal Capital is kind of the Swiss army knife of all budgeting apps. It’s like your own handheld financial advisor with tools to help you invest. You can keep track of your saving, checking, and credit card accounts. It also keeps tabs on 401(k)s, IRAs, and loans.

~Here’s to your Financial Health!

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