- Choose a system to determine how you will track the budgetary information, whether it’s paper and pencil, an Excel spreadsheet, or a personal finance software package.
- Choose a system to determine how Determine your income from various sources, including gross salaries and wages, bonuses, interest and dividend income, pension or Social Security income, tax refunds, rental income, child support or alimony payments received, and other similar sources of income. You should be conservative with your income calculations and aggressive with your expense estimates.
- Choose a system to determine how Determine your expenses by estimating how much you spend monthly on your necessary expenses, variable expenses, and discretionary expenses. Necessary expenses are those that typically do not change in amount month to month (i.e. mortgage, auto loans and other loans, insurance, savings, etc). Variable expenses are necessary in that you need to have them but the amount you spend each month may vary (i.e. groceries, utilities, repairs/maintenance, phone, credit card debt, clothing/laundry, medical bills, transportation, etc). Discretionary Expenses, also known as “fun money,” are expenses that aren’t needed for survival (i.e. recreation/entertainment, dining out, movies, books/magazines/CDs, gifts, vacation, furniture, tools, sporting goods, cable TV, gym membership, charitable contributions, etc). Next, track all of your spending for a couple months without changing your spending practices during this time.
- Choose a system to determine how Compare your income to your monthly expenses to see how much money you have coming in and how much you have going out. Notice where your money is going and if it is exceeding your income. If your expenses are exceeding your income due to high credit card spending, you’ll need to reassess what you are spending money on. As soon as you get your credit cards paid off, you’ll find that your income goes a lot farther.
- Determine your financial goals and establish a target budget to work towards.
- Improve your financial situation by focusing on the expenses that you have, since this is an area where you probably have more control over versus your income. Most people tend to find they have the most money-saving ideas by looking at their discretionary expenses. Were there some items that you were spending more than you predicted? Was everything you spent money on worthwhile?
- Monitor your progress towards your goals to be sure that you are on target. You may find that some of your goals were unrealistic, in which case, you should adjust your goals and evaluate a new budget that works better for you.
- http://www.fesconnect.net/CFarmerogogo
