Is your 2022 New Year’s resolution to take control of your personal finances? Now more than ever, there’s never been a better time to learn how to budget.
Budgeting allows you to be more independent, plan for the future, and become more financially secure.
iCASH, an online alternative to traditional payday loans, offers these five easy steps to creating a monthly budget that will put you on the right financial path, regardless of your income:
Step 1: Know your net income
Determine exactly how much money you make each month, also known as net income. This amount includes the amount of money you take home after taxes, and other payments are deducted from your paycheck, so you have an accurate figure to include in your budget.
Step 2: Track your monthly expenses
Do you know where all your money is going? Take the time to track your monthly expenses by listing everything you spend money on, big and small. These costs can include your daily coffee, gas, parking, phone bill and more. Everything goes on the list.
Step 3: Categorize your expenses
Now that you have a better idea of your expenses, divide them into two categories.
Your fixed expenses, such as rent or car payments, stay the same each month. Variable costs vary based on usage. These could include entertainment costs or food costs.
Dividing your costs allows you to better focus your efforts. While you can’t do much about fixed expenses, you can look at your variable expenses to see if there’s an opportunity to save more.
Step 4: Calculate the difference between income and expenses
Subtract your total expenses from your net income and see how much you have left.
The remaining amount will represent your monthly savings and the money you can devote to paying off your debts. If you’re spending more than you earn, it’s time to take a look at those variable expenses and figure out what can be reduced.
Step 5: Review and assess your budget
You’ll know if your budgeting strategy has worked if you’ve reached your savings goal and stopped taking on more debt. If not, re-examine your spending habits and figure out how you can improve your budget plan.