How To Plan A Monthly Budget That Actually Works
If you are finding difficulty meeting your monthly payments, then it is the time that you should evaluate your monthly budget. No matter how financially stable or in debt you are, everyone needs to plan a monthly budget that actually works. Monthly budgeting actually promotes financial consistency and helps you to cut back on unnecessary expenses. There are many ways to organize your budget using budget worksheets and online financial software. They show up a spreadsheet, computer screen or a document of you and your family’s monthly spending and income.
The key to making a smart budget plan is by knowing the difference between your needs and wants. A "need" is something that is necessary, required or essential like having a house, clothing, food, or medication. A "want" is something that you may not necessarily need like going out for meals, a trip, a gym membership, or branded shopping. Needs and wants vary from person to person. One person’s want may be another person’s need. Once you have figured out your needs and wants, you can move ahead and start a budget.
What is a budget? A personal or household budget is a detailed list of your expected income and expenses that help you plan your money in a best possible way. With a monthly budget planning you can able to track your actual spending habits in an easy way and can also know about how much you have saved.
By listing all of your income sources against all of your monthly expenditure, you get a clear picture of your personal cash flow that will allow you to make better financial decisions. A detailed budget plan can also help you understand what you can afford and what not.
Creating a budget is easy but what important is that you stick to it if you really wish to accomplish your financial goals. In fact, according to a survey, it has been observed that creating a budget is indeed helpful in reducing stress and improve your health because it allows you to take control of your finances. Use a hand-written budget, an Excel spreadsheet or a software program to create a budget that works for you and you must regularly practicing it.
When it comes to planning a monthly budget, try using a 50/30/20 rule. It says that you should allocate 50 percent of your income to your needs, such as rent or mortgage, food, car payment and gas, minimum payments on debt, and other necessary things like your health, safety, and survival.
Then put 30 percent toward wants, such as your lifestyle like cable connection, gym membership, easting out, going for movies and more. The last 20 percent of your income should be saved in an emergency fund, an IRA, retirement account, another investment account, or used to make extra payments on outstanding debt.
Get most out of your budget by using the following budgeting tips-
- Design financial goals for your budget like saving for home down payment, owing a car or paying off a credit card bill.
- Pay yourself first by moving your hard earned income into savings with automate savings option.
- Identify the necessary and unnecessary expenses.
- Staying away from impulsive buy.
- Get the whole family involved in budgeting and helping you save money.
- Find a budgeting app or software that is easy to access and quick to use.
- Track your actual spending each month and make comparisons. Adjust your spending as needed.
- Don’t forget to treat yourself.
- Do not visit a store without having a planned grocery list in your hand. This will help you avoid overspending.
- Take a break and avoid becoming resentful about your budget.
Gather all of your monthly bills. Since many expenses may fluctuate each month such as your credit card bills, utilities, medical bills, and food, so you must review them by checking your bank account statements for the past three to six months to take an average and estimate the expenses that vary from month to month.
Create a category of regular and irregular income and expense in your budget and subtract the total expenses each month from your total income each month and anything left over can be put into savings or other categories. If there is a negative balance in your budget, it’s time to reduce your expenses, increase your income, or both.
Making a budget is quite easy. Firstly you need to figure out your after tax income. The amount you receive is probably after automatic deductions for 401(k), savings, health and life insurance. After figuring out your income you need to choose a budgeting plan that works for you. A budget must cover all your needs and wants and savings. After budgeting you need to track your progress. For that you need to record your spending or use online budgeting and saving tools. The next step is to automate your savings. You must do that as much as possible and then you need to revisit your budget as needed. Your income, expenses and priorities may change over time and thus you need to adjust your budget accordingly, but always need to have one.
Having a budget is very crucial if you don’t really know where your money is going and if you don’t save regularly. It is also possible that you face problems in paying off your debts and just can’t take control of your finances. Budgeting will teach you how you can manage your money like a pro. It helps you figure out how much money you get, spend and save. Making a budget acts as a driving force in your life that will let you balance your savings and expenses tremendously. It guides your spending to help you reach your financial goals.
Making a budget can help you in several ways, like:
- Setting spending limits
- Finding ways to pay down your debts
- Help you learn living within your means
- Help in reducing stress
- Help in saving money for things that are more important to you
- Help in taking your finances in your control
Before you start budgeting you need to think about your financial goals. Start with making short term financial goals to long term financial goals. Your short-term money goals include paying off your credit card, cutting on monthly expenses and building an emergency fund. Your long-term goals include paying off your loan, saving to buy a home, saving for children’s education and increasing your retirement savings.
Another important thing that you should know is where your money is going. Track your money to figure out what comes in and what goes out of your pocket. Every dollar you spent make huge impact on your overall budget. For example, if you spend $2.50 a day on coffee, it will cost you more than $900 a year. Now that’s quite huge! So, you must track exercise of everything you buy from groceries to daily cut of coffee, keep a copy of bills you pay during a month and try dividing your expenses in two categories that are needs and wants. Making small changes to your spending habits can have a major impact of your budget and your ability to save.
Well if you think you have a bad habit of using your credit cards for your every purchase then you must try out all cash-diet formula. When making a purchase, use only cash and you will see how well you are avoiding most of the expenses. By leaving all your cards at home you can avoid debts. Check out online to learn ways to save money. Budgeting will work only if you increase your savings and reduce your expenses.
By planning your monthly budget effectively, you can provide prosperous and comfortable life to your family. Thanks to proper and strict budgeting, you can able to cut down on necessary expenses which usually drain out money from your bank account. Budgeting is all about saving money by understanding and adjusting the unnecessary expenses and your spending habits with the help of a budget planned or calculator. Keep providing financial security to your family with effective budgeting planning.
If you still think you are unable to cope with your finances and unable to make ends meet, then you can consider a refinancing loan. Another way to take control of your finances is by taking a help of a reputable financial advisor. You can get help from several financial advisers for free on Internet. You can even upgrade your financial knowledge by reading various articles, blogs and books on finance.Register Now