How to Create a Budget
January is the perfect time of year to create a budget and resolve to stick to it through 2018. However, any time is a great time to organize your finances, understand your money, and create a budget. A budget will help you manage your income and expenses, plus it’ll eliminate the stress of living paycheck to paycheck and allow you to begin saving money for your future.
Write Down Your Income
The first step to building a successful budget is to remember that it has to work for you. There is no one-size-fits all solution and what works for someone else may not necessarily work for you. Begin by getting a pencil and paper and writing down your monthly income from all sources. Include any money you make from your regular job and any additional income from a job like Lyft or Uber. List the dollar amounts in a column and then total them up at the bottom. Understanding your income is the first step to successfully creating your budget.
List Your Expenses
In a column next to your income, begin listing out your monthly expenses. Include everything that regularly comes out of your bank account every month, including rent or mortgage payments, utility bills, services like meal delivery or Netflix, insurance expenses, and the money you normally spend on grocery shopping. While you list your expenses, take time to evaluate if all of them are essential or necessary. If you can cut a few services that you don’t use and can live without, your future self will thank you for saving money. Total up your expenses at the bottom of the column, then subtract them from your income to see how much money you have left over each month.
Don’t Forget Savings & Investments
Next, decide what to do with your leftover money. It’s a good idea to put all or part of it into savings or investments. In the future, if you have an emergency expense, you’ll have your savings to fall back on just in case. Even if you can’t save a lot of money each month, you’ll be surprised how quickly small amounts add up in a savings account. It’s important to commit to saving that money, not draining your savings account every time you’re tempted by eating out, new electronics, or a shopping spree. If you want to begin investing, but aren’t sure where to start, do your research online or consult an investor who can help you put your money to work for you. Savings and investments are essential, but often forgotten, parts of creating your budget.
If you have money left after accounting for all monthly expenses and savings, you can spend it – but do so wisely. Spread your spending money out over the entire month instead of spending it all at once. That way, you won’t be tempted to dip into your savings account at the end of the month. Budgeting is a balancing act that requires a lot of dedication and determination, and spending a little money will help you stay on track with savings and on-time bill payments. If you can do it responsibly, include spending when you’re creating your budget.
Supplement Your Budget
After you’ve got your budget written down on paper, commit to sticking to it. If it just doesn’t seem like you’ll have enough money left over for spending, saving, or even to pay your bills, consider supplementing your income. The best part about building a budget is that you’ll know in advance where your money is going – or if it’s not enough to make ends meet. You can then make a plan to increase your income and stay in the green. Supplement your income with a loan, taking up odd jobs for friends or family members, or become part of the gig economy and drive for Uber or Lyft. If you’re a jewelry-maker, photographer, builder, or other creative worker, you can even turn your hobby into a money-making enterprise.
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