Basic Money Management
Creating a Personal Budget
Have you created a personal budget? While many people love money, few actually like managing their income and creating a personal budget. If you haven't created a personal budget, you definitively want to consider at least setting up a basic personal budget. A personal budget can help you organize your financial information in order show where your income is coming from as well as where it is leaving. By setting a budget you can cut unnecessary costs and save tons of money.
Do you have a budget?
The First Step to Creating a Better Budget
Unfortunately, most people have the misconception that budgets are hard to create and often not worth the trouble. However you can often create a basic personal budget in an hour by following a few simple steps.
You want to begin by collecting all your financial information. This includes any information that pertains to bills, incomes, expenses, and pretty much anything that has too do with your money. Also be sure to collect information about any investments or bank accounts you have. The more information the better.
Knowing Your Income
When creating a budget, you obviously want to know how much you learn before you pay any bills or expenses. Record any source that contributes to your monthly income. This is a very important step and should be taken seriously. Try not to estimate, but rather find the exact statistics based on salary, hours worked, etc.
After that you want to complete your list of expenses. Expenses are basically anything you spend money on. This includes recurring bills such as car payments and insurance, as well as any miscellaneous costs such as a new dishwasher. You can further divide these expenses into expenses that are recurring vs one time expenses.
Monthly Income vs Monthly Expenses
Now that you've compiled both your lists of income and monthly expenses, you should be able to find out how much you truly bank per month. If your income is significantly higher than your expenses than you are in good shape. If your expenses outweigh your income then you might be in a little trouble.
If your income is lower than your expenses you definitively want to try and fix that. However since you've collected information about your expenses, you should be able to pinpoint the largest expenses and try and eliminate them.