9 Steps to Create Your First Budget

To create your first budget may not sound an interesting thing to do. But it is vital to take control of your finances and save for some goals to get out of debt. Here you can learn 9 steps to start your own budget.

Step 1: Gather All Your Finanical Statements

Financial statements may include bank statement, bills, accounts, regular payment details and receipts.

Step 2: Caculate Your Income

It is important to use your net pay to caculate monthly income. Source of income includes normal wages or salaries, overtime pay, tips, other jobs, investments and other.

Step 3: Caculate Your expense

The best way to figure out your expense is to use statements and receipts gathered from Step 1. These information can help you how much per month you spend on each category.

Step 4: Set Your Goal

Define why you create first budget. The goal could be to pay off debt in 3 years, start saving for college, or start saving for house deposit. Therefore, it is important to set your goal clearly and specifically.

Step 5: Set up Your Categories

Break your budget into a few categories, such as housing, food, clothing, entertainment, car, loan payment, and utilities. One tip is to organize your expenses categories into needs. For example, loan repayment an utilities may be ranked before clothing and dining out.

Step 6: List Your Spending under Each Category

Pur the average amount you spent over last 6 month under each category. Don't forget the payment for yearly payment. You may break these payment into monthly amount and leave the money aside.

Step 7: Caculate Your Surplus or Shortfall

If your income is more than your expense, you are in good financial situation. This means you can use these surplus to prioritize these categories with high needs, such as loan payment and retirement saving. If your income is less than your expense, it means some changes must be maded.

Step 8: Make Adjustments to Expense

Do proper adjustment on each category to make your income equal to your expense.

Step 9: Review Budget Monthly

It is probably not working for yuor on the first month. It is key to review your first budget on a regular basis. Take a few minutes every month to compare the actual expense versus your plan. It will show you the areas that have been improved and need to be improved in the future.




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