In order to keep track of where your money goes, you need to have a budget. A budget is simply an itemized description of income and expenses. Having a budget will enable you to determine how you spend your money, get more out of the money you have and make it easier to meet the financial goals you have set for yourself. These are the steps involved in putting together a budget:
Choose a system: This is determining how you will track the budgetary information. You can use a personal financial software package. If a paper and pen works for you the better.
Determine your income: Calculate and record the income you receive from various sources. E.g.
Determine your expenses: More time will be needed here. Find how much you spend on the expenses:
Fixed committed expenses:
Variable Committed Expenses
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Discretionary Expenses
Track your spending say per month. Try not to change your spending practices during this time.
Compare Income and Expenses
Having completed the above procedure, you should be able to answer these questions:
If your spending exceeds your income, then your first priority is to change this.
Determine your Goals
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Having established a clear snapshot of your financial health, set a target budget and work towards achieving it. This can be like saving for child’s education, or reducing the expenses by certain amount.
Improve the Situation
The main purpose of having a budget is to find ways to improve it. Here are some money-saving ideas you might can consider to improve your situation:
Monitor your progress
Monitor your budget on an ongoing basis to confirm that you’re still on target if not make adjustments where necessary.
