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Create a Monthly Budget

Creating a monthly budget is one of the most important things you should consider if you are looking to achieve financial stability. A monthly budget has a lot of advantages, but the most important of all is the fact that it helps you spend less than you make, which is the most important thing if you want to have our finances under control. Even though creating a budget does not sound exciting, it is vital if you want to put your life in order.

Calculate your income

The very first step to creating a monthly budget is to calculate your monthly income. In order to do that, you will need to gather all the documents of the money you get every month. The documents should state your income after the taxes, such as tax credits or salary taxes. There are many software apps you can use to help you with this step, but you can do it by yourself on a sheet of paper. Calculate exactly how much money you make in a month after proceeding to the next step.

Determine your monthly expenses

In order to make a real monthly budget, you need to consider every expense you have. Write down all your expenses, such as rent, loans, groceries, subscriptions, extra expenses, etc. Anything you spend your money on is an expense you need to consider when you make this list.

Are your expenses fixed or variable?

You should break down your expenses into fixed and variable. The fixed expenses include the spending that is relatively the same every month, and those that are variable usually vary from one month to another. Your key expenses should be the fixed ones, such as rent or mortgage. The variable expenses are important when you will start to make adjustments.

Budget it away!

After you have determined the income and expenses, is time to start budgeting. Consider some key questions, such as:

  • How much are you willing to spend on each expense?
  • Are you willing to make small savings or significant cutbacks?
  • Which are the fixed costs you cannot change?
  • Which are the variable costs you can adjust?

Fixed costs are important

Always remember that the fixed costs are more important and that you can easily cut from the variable expenses in order to make your budget work. Consider how much money you have left every month after you pay all the fixed and important costs and split those into the variable expenses.

Sources:

http://www.yourwealth.co.uk/managing-your-money/how-to-create-a-monthly-budget

http://financialplan.about.com/od/budgetingyourmoney/ht/createbudget.htm

 

Author:

Finance Expert, Writer, Entrepreneur

Tammy Richards is a passionate finance expert who is also a writer and business owner. With over 10 years of experience as a finance expert, Tammy wants... read more

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