One of the initial steps that you have to take to achieve financial success is to create a budget that will keep you from being broke. Below is a quick walkthrough to get you through:
1st step: LIST DOWN YOUR MONTHLY INCOME
You should know how much you’re getting a month to be able to get started on creating a budget. List them all including your other sources of income. This is where you’ll be subtracting your expenses from. If your income is inconsistent, try your best to estimate what your monthly income will be for this month. You can take the average of the last three months’ income and use that as your income.
2nd step: LIST DOWN YOUR MONTHLY EXPENSES
Start by listing your fixed expenses, these are the expenses that you are required to pay. Examples include debts, water and electricity bill, rent/mortgage, gas, car payment, groceries, etc.
3rd step: SET YOUR FINANCIAL GOALS
Look at the vision that you have for your financial life and write that out. Think about what you want in the ideal and think about where you are right now. Whether you want to be financially successful, debt free, or wealthy, that goal will determine your personal financial goals that you can set for the short-term and include in your monthly budget.
4th step: DETERMINE YOUR NON-ESSENTIAL EXPENSES
Also known as discretionary expenses, these are the expenses that you currently pay for, but are not truly needed. Examples include entertainment, dining out, gifts, vacations, personal care, and clothes. The budget for this can be adjusted based on what you can afford.
5th step: SUBTRACT YOUR INCOME FROM EXPENSES
After subtracting your expenses from your income, check out the result. If you get a positive number, this is good news for it means that you make more money than you spend. You could put more budget into your savings or your other finances. If you break even, this means that you have exactly enough money, but no margin. You may want to adjust your non-essential expenses to give yourself some margin. If you get a negative number, this means you’re spending more money than you take home and this is not good. If your number is negative, adjust your budget by decreasing some of your discretionary expenses or find a way to increase your income. Make sure your financial goals are being met before spending on discretionary items.
6th step: MAINTAIN YOUR BUDGET
Lastly, you need to implement, monitor and adjust your budget accordingly. Set a day to look at your accounts and evaluate the changes that you have to make. The important point is to check in regularly. This will help you implement your plan and stay on track. As you monitor your budget, reflect on the process, and make changes as needed, keep going and let your budget be the system that helps you achieve financial success.