Budgeting, Bills, and Savings

Creating a monthly budget doesn’t have to be complicated. At its core, it boils down to basic math – you take your total income and subtract your total expenses. As long as you’re in the positive on that equation, you’re in good shape. The following six steps can help you budget smarter and plan for financial success.

Step 1: Calculate your monthly net income. This is your take-home money after taxes, retirement contributions, incentives, and any bonuses you may have.

Step 2: List the essentials. Start a spreadsheet and apply a monthly cost to your family’s necessities, which may include the following:

  • Rent or mortgage payments
  • Car payments
  • Car insurance
  • Renter or home owner’s insurance
  • Utilities like gas, water, and electricity
  • Mobile phone and data plan
  • Student loan payments
  • Basic food and fuel

Step 3: Do the math. Now that you have your total net income and the cost of your basic necessities, some simple subtraction will tell you the key number – it’s your net cash flow. Hopefully you’re in the positive, because there are still some significant costs to account for.

Step 4: Factor in other costs. Tracking expenses month-to-month and including certain variables you can estimate like food and fuel is a great start. But don’t forget to factor in one-time or annual expenses that might otherwise throw a wrench into things. This could include things like property tax, car registration, back-to-school expenses for the kids, car or home maintenance, or vet bills.

Step 5: Look for cost-cutting opportunities. This could be anything from trips to Starbucks to meal planning, bulk purchases, or cutting off subscription-based services you rarely use.

Step 6: Plan ahead and save. Finally, ask yourself this question: if you were to get hit with an unexpected expense right now, how would you pay for it? Financial experts will tell you that you need to save enough to cover six months of expenses. Every little bit you can put into savings or investments will help.

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