Once you’ve reviewed your expenses and income, you will be able to take note of any trends with your spending and begin to assign spending values in specific categories. Review expenses and decide on spending values Once you’ve made a list of all monthly expenses and how much you spend on each one, add all of the expenses together to find your total monthly expenses. Make sure that you are taking note of any existing or upcoming loan payments as well.If this is difficult, look at your spending in the previous month. For variable expenses, such as groceries, that fluctuate from month to month, you will want to look at your average spending for the past three months.Next, calculate how much you spend on each monthly expense: Here is a quick list of common expenses to help you start: Flexible : Non-essential expenses that can easily be reduced or eliminated (e.g., Netflix subscription, gym membership).Variable : Expenses that vary based on usage and fluctuate over time (e.g., groceries, gas, utilities).Fixed : Expenses that don’t change from month to month (e.g., rent, loan payments).Your list of expenses should include the following: Now that you have calculated your total monthly income, it is time to figure out your monthly expenses. To learn more, check out Federal Income Tax Brackets & Tax Rates by Nerdwallet. The amount of taxes you pay will be based on your income tax bracket which is based on your total annual income. Note: If you earn freelance income or other income where taxes are not automatically deducted, you may want to set aside money for tax season. Using one of the above methods will help calculate an accurate income without overestimating, which will allow you to form a more reliable budget. If your income is inconsistent, or fluctuates from month to month, you should either take your average income, or base your monthly income on your lowest-earning month over the past year. If you have additional income through benefits, freelancing or other additional money, make sure to include that in your income as well. If you work part-time or full-time, you can calculate your net income (income minus taxes) by totaling your monthly paychecks. Having a budget that takes into account all of your financial information will help you create an accurate budget. The more information you have, the better. The purpose of gathering this information is to help you get an accurate reading of your current financial state. Information regarding expenses (e.g., grocery receipts, transportation related receipts).To compile your financial information, you will want to gather things like: You Need a Budget : Best for hands-on, zero-based budgeting.Honeydue : Best for budgeting with a significant other. Nerdwallet recommends the following apps: Budgeting apps can automatically total your spending from your debit and credit cards, as well as track the balances of your savings, investments, and loans. It can also help quickly identify areas where you might be overspending.įree budgeting apps also make it easy to budget. Staying up-to-date on where you spend money can help make setting realistic goals possible. Using a template spreadsheet is a good way to start tracking all of your spending. Here are six easy tips for creating a personal budget: 1. We’ll share a few throughout this article to help you get started. There are lots of mobile applications and online resources available that you can find through a quick internet search. One of the easiest and most common ways of setting up a budget is with a spreadsheet or a budgeting template. How you budget is just as important as where you budget.
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