I know, everyone thinks that budgeting is an evil word, but it’s not. It is an itemized list of all of your income sources and your expenses for a given period of time. In reality, a budget is simply a guideline for how you want to live and it will keep you on track to accomplish anything you want financially. My goal here at Net Worth Explosion is to become financially free.
Step 1: Using Budgets as a Tool
Budgets help you prioritize your spending and manage your money. They show you where you’re wasting money, where you could afford to spend a little more money, and where you may want to tweak a few numbers to better acclimate to your lifestyle and goals. They create peace of mind and keep you from worrying when something bad happens. Did your car break down? Does your kid have to go to the doctor unexpectedly? Did you want to do something spontaneously with your significant other just because it would be fun? If you’re doing it right, you’ll know that there’s money in the bank/budget to cover these items. Stress levels will be lower because you’ll finally have control of your finances. Nothing bad can happen by creating a budget!
How to Create a Budget
Creating a budget only takes a short amount of time. The first time you do it may take longer than the rest but it is well worth taking the time to get started. You want to create a simple zero-based budget. This budget will consist of every dollar you are expecting to bring in this month. It will also include every outgoing expense. Here’s a list of steps to getting started:
- Write down your total household income– This is all money that comes into your house (after tax). Income from however many jobs you may have, social security, disability, rental income, and side gigs.
- List all of your expenses- This includes all of your bills (mortgage, gas, electric, car payments, etc…). You’ll also want to think about everything else you buy over the course of the month (groceries, going out to eat, gas for your car, entertainment, etc…).
- Subtract your expenses from your income- There will either be money left over or you won’t.
- Track your expenses for the month- You can write these down in an excel spreadsheet like the one below, check out these budgeting forms, or use automated websites that will do it for you.
Automated Websites You Can Use
There are many websites out there for you to use to track your budget and monitor your finances. Here are a few that I recommend and have used personally. Check them out and use whichever ones work best for you!
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