Budgeting
A budget is a way to help you organize your finances. Basically,
it tells you what money comes in, what money goes out, and where the
money goes.
A budget can help you:
* get control of your finances;
* keep out of financial trouble;
* become a smarter consumer;
* set and achieve financial goals;
* pave the way to a more secure future.
To create a workable budget for yourself, follow these five steps:
Step 1: Gather the information you need. You will need any paycheck
stubs, tax returns, checkbook registers, credit card statements,
bank statements.
Step 2: Determine your monthly income. Add up any money you take
home from your jobs and from support from your family. Remember, a
credit card is NOT a source of income.
Step 3: Figure out how much you spend each month. Estimate your
fixed and variable expenses. Fixed expenses are those that you have
to pay each month. These include rent, car loan payments, and
student loan payments. Variable expenses include those that change
from month to month. Typical variable expenses include clothing,
entertainment, utilities, and groceries.
Step 4: Figure out your bottom line. Add your total fixed expenses
to your total variable expenses. This will be your total monthly
expenses. Substract your total monthly expenses from your total
monthly income. The result is your bottom line.
Step 5: Determine if you are spending too much. A budget does not
change the way you spend. But it will show you where some changes
may need to be made. If your expenses are greater than your income
you will need to cut back on your spending. Do not rely on a credit
card to cover any shortfalls. If you do have a shortfall, review
your budget to see where you can cut expenses. Look at your variable
expenses. Which ones can you cut back on or eliminate?
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