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Creating A Budget-Money 101

The first step in any personal finance plan is a budget. Any individual, family or business should have a budget of some kind. Some may think that if they have plenty of money they do not need a budget. A budget is not just for people who are struggling financially by any means. Even if you have more money than you know what to do with, you still need a budget. A budget allows you to see where your money is going each month and choose where you want it to go. If you have an excessive amount of money, you still need to know where it is going in order to put your money to work for you in the best way possible. ALL businesses need a budget, if you can’t see how much money is coming in and going out each month you will have no idea how successful or unsuccessful your business is.

  1. Start with a list of all sources of income to add up the money coming in each month
  2. Make a list of all expenses you have on a monthly basis using your bank and credit card statements.
  3. Divide the list in to fixed expenses and variable expenses(those that change on a monthly basis).
  4. Write the monthly amounts for all of the fixed expenses.
  5. For categories that vary in dollar amount on a monthly basis, add up six months worth and calculate the average spent per month to give you an accurate estimate for that variable expense.
  6. Total your expenses and compare it to your total for your income
  7. If you have money left over first make sure that you have accounted for ALL expenses, including small things like coffee each day etc. After that whatever money is left over you can decide how to allocate it. You may choose to put a certain amount in to savings each month or put more towards paying off a bill.
  8. If your expenses are more than your income then you need to start looking at your list of expenses and decide what and where you can make cuts. If you are living on a monthly basis like this above and beyond your means using credit cards, this will get you behind quickly to the point where it will be hard for you to catch up.
  9. Sites like Mint.com and other online budgeting tools can help you easily track your monthly budget and expenses.
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