3 Simple Steps to Creating a Realistic Monthly Budget
Creating a realistic monthly budget is one of the best ways to manage your money and achieve your financial goals.
A budget helps you track your income and expenses, plan for the future, and avoid overspending.
Here are three simple steps to creating a realistic monthly budget:
1. Calculate your income.
Your income is the money you earn from your job, business, investments, or other sources. To calculate your income, add up all the money you receive in a month, after taxes and deductions.
If your income varies from month to month, use an average of the last three months or the lowest amount you expect to earn.
2. List your expenses.
Your expenses are the money you spend on your needs and wants. To list your expenses, go through your bank statements, receipts, bills, and other records and write down everything you spend money on in a month.
Categorize your expenses into fixed and variable. Fixed expenses are the ones that stay the same every month, such as rent, mortgage, insurance, car payments, etc.
Variable expenses are the ones that change depending on your usage or behavior, such as groceries, utilities, entertainment, clothing, etc.
3. Compare your income and expenses.
The final step is to compare your income and expenses and see if you have a surplus or a deficit. A surplus means you have more income than expenses and a deficit means you have more expenses than income.
Ideally, you want to have a surplus so you can save money for your goals or emergencies. If you have a deficit, you need to find ways to increase your income or reduce your expenses or both.
