Budgeting is a task that sometimes comes with a little struggle. With all of life’s regular expenses, you may find yourself struggling to save anything extra. While this isn’t an uncommon problem, it is something that can drastically impact your overall financial health. So, where does the solution lie? Setting a realistic budget that aligns with your financial goals. Here’s how:
Calculate Fixed and Variable Expenses
Your fixed and variable expenses are one of the first few things you want to consider when you’re setting up a budget plan. Fixed expenses are the things you are required to pay for every month, like rent, mortgage, or utility bills. After you pay your fixed expenses, what you have left is available for your variable expenses. Your variable expenses include things that vary from month-to-month like, groceries, dining and entertainment, gas, and shopping. Doing this is going to help you understand where exactly your money is going every month. If you want to get an accurate estimate for your variable expenses, look at your last few bank statements.
Factor Debt to Income
After you’ve figured out your expenses, factor in your income. Your income can consist of your regular salary or hourly wage, and any extra money you receive throughout the year from gifts, investments, or supplemental income. You can then determine how your debt impacts your income and where it’s leaving you financially.
Set Up Payment Plans
Payment plans are a great way to stay on top of your regular payments and avoid unpaid bills ending up in collections. It shows the lenders that you’re paying and helps you factor monthly payments into your budget easily. Automatic payments are also an excellent way to stay on top of your payment plans without worrying about late penalties or missing a payment.
Remember that your budget needs to be realistic to fit your life and your needs comfortably, while it helps you manage your money. Sometimes finances change; your budget should be flexible enough to reflect any changes that happen. You can even go as far as analyzing your budget every few months to make sure it’s still working for you.