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The first step to successful money management is creating a budget. A budget consists of two parts-income and expenses. It can be difficult to manage your money if you don't know how much you are spending, so it's essential to create a budget that you can live by. Here are some helpful steps to consider when building your budget:
Write down all of your expenses - Go through your bank statement from the last few months and determine where you are spending the majority of your money. Start with your mortgage or rent payment, then figure in transportation and insurance expenses; finally, determine how much you spend on items such as telephone, cable, groceries, healthcare products, and investments.
Add up your expenses - Once you have created your expense list, add it up. Be sure to figure out all of your expenses as if they were a monthly expense. For example if you pay your car insurance twice a year, add up those two payments, and divide by 12 to get your monthly expense.
Cutting back - If your expenses are higher then your take home income, it's essential that you begin cutting back. Start by determining exactly how much you need to cut back on each month.
Keep track of your finances - The final step is to write your budget down. Find a secure place to write down the dates you will be paid, the bills you need to pay, and the date that they need to be paid. Then you will know just how much money you will have to spend each month. Additionally, computer programs such as Microsoft Money and Quicken are also beneficial because they can track your finances, schedule payments, help you cut debt, and plan for your future.
Now that you have created a budget that works for you, be sure to keep close records of your actual income and expenses. This information will help you stay on top of your finances and prepare you for financial success.
Source: John L. Scott Real Estate
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