Building a Basic Budget
If you find you are running out of money before the end of each month, don’t panic. You aren’t alone, and it happens to most everyone from time to time. But if this is a normal occurrence, you need a plan to get your finances on track. Developing a basic budget and sticking to it is the first step in managing your money.
First, you need to know how much you have each month to meet your expenses. Start by documenting your monthly income. Include any side jobs, additional income or child support you receive each month.
Once you have listed all income sources, determine all of your expenses. Go back through previous months and log all expenses so you can see where your money is going. Some items will be mandatory, which are items like housing, groceries, gas, utilities, a car payment and savings.
Other expenses will be discretionary, which means they aren’t essential living expenses. These can be dining out, gifts, hobbies or entertainment.
Just make sure you log them all. You can simply write the items down, enter them in an excel spreadsheet or use a free budgeting app or online tool.
Next, compare your income to your expenses. Ideally, your income should cover all of your expenses. If the income is not covering all of your expenses, take a hard look at what is coming in versus what is going out. You may need to look for creative ways to decrease some of your discretionary expenses. Can you save money by eating at home more often? Are there splurges that can be cut?
Once you have reviewed your income and expenses, you will need to make a plan and follow it. Start tracking spending for each category and make sure you are staying within the amount set for each one. Don’t worry if you have to make adjustments when starting out. Changing spending habits takes work, but it’s worth it in the long run.