Budgeting Basics To Help You Control The Finance

Budgeting Basics To Help You Control The Finance

The primary way one can take control of personal finance is through budgeting. A well-written plan which guides you about spending money is known as a budget. One can prepare an annual or monthly budget. It helps in making all the financial decisions much well in advance and it would be quite easy to cover all the expenses an entire year. Also, budgeting would help in building wealth same way as a good trading plan will guide you being a successful trader. You could learn about how to be successful in trading by reading the full report.

Importance of budgeting

Budget is quite a powerful tool as it lets you in determining where and how you wish to spend the money.  When you are able to master the budgeting process, you can ensure that every dollar is spent the way you want.  When you have the budget in hand, you could track all the expenses and determine whether it’s matching the priorities.  When a person begins budgeting, he would be surprised to find that how much money gets spent on things that are not important to him at all.  Budgeting makes sure that you are sticking to the financial plan and monitor the progress on reaching the goal.

The process of setting up the budget

Budget setup is an easy and straightforward process. If you have never budgeted earlier, then you can start by checking out your last 3 months bank statements to get an idea about the monthly expenses. You could use that statement into the group the expenses into different categories.

Step 1- List all the income earned in a month. It should consist of all the payments received like your paycheck, income from any other sources like investments, child support, etc.  If you are running the business, you should include the amount you pay yourself from the business.

Step 2- List out the expenses beginning with most important to least important. Whenever required you can make the cuts easily when the expenses are listed in order. The expenses that come in the top of the priority should be your necessities like food, utilities, debt payments, savings goals, etc. Towards the end of the list could be the luxury spending like entertainment, travel, eating out, etc

Step 3- You need to compare both income and expenses. Your expense should be always less than the income. If the expense exceeds more, then you should find ways to cut the expense by cutting down the spending on luxury items. This budget will help you in keeping track.

 

 

 

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