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A survey done by Gallup shows over 68% of households in the US do not prepare a budget. That leads to great financial stress mainly caused by student loans, mortgages, car loans, and other forms of debt. People of all social classes need a budget to enhance their financial situations.
Many people perceive that budgets are only for people who receive paychecks. That is wrong. Everyone needs a budget to help in controlling financial life, reduce stress, increase savings, and help you accomplish your goals. People waste a lot of money on food, cars, clothes, and homes.
Tips on how to make a budget and create a budget
The positives of creating a budget
- It basically helps you manage money
- Budgets keep you mindful of your income and expenses
- You know how much you can spend on something in a month
- Budgets help you evaluate your expenses and areas of improvement in spending habits
- Budgets will help you reach your life goals, clear debts and save retirement money
Make your budget electronically or on a piece of paper?
It is your choice on whether to use paper or electronic version. Choose whatever you are comfortable with. Electronic versions are flexible to making changes. Check out Personal Capital, which is similar to Mint.com, to help you evaluate and aggregate your financial situation. You can connect it with your mortgage, bank accounts, retirement accounts, etc.
Track your income and spending
Identify all sources of your income and gather all your receipts, bank, and credit transactions to help you make a realistic budget. Track every single transaction daily and evaluate your spending by the end of the month. After the first month of experimenting, the results will shock you because you waste a lot of money. That will encourage you to be wiser on your future spending.
Budget category: Expenses
During budgeting, ensure that you take realistic expenses to avoid huge deviations in reality after analyzing. Include the following expenses when creating a budget:
- Car – gas, maintenance, insurance, license plate fees, monthly car payment, etc.
- Home – rent, utilities, insurance, property taxes etc.
- Food – groceries, snacks, eating out, etc.
- Savings – for events live weddings, travels, retirement
- Cell phone
- TV – Netflix, Hulu, etc.
- Entertainment – movie tickets, music concerts, sports
- Health insurance
- Charity – if you are a regular donator
- Miscellaneous – gifts, home accidents
Don’t forget your loved ones when making your budget
Inform your partner about your budgeting plan. It works best if your partner and family members are aware you are on a budget. Conduct family money meetings because they facilitate a successful budget and help you accomplish the financial goals in the plan.
Make changes if or only when necessary when creating a budget
Go through your budget regularly and do what you feel is best in your situation. Go through your budget daily, weekly, or monthly as you wish. Adjust your budget to reflect a change when your income changes, change in your goals and expense habits.
The critical factor is to be realistic about your income and spending habits when planning a budget.