In today’s world where spending on goods and services is a norm, making a budget becomes the practical way to get a hold on your spending pattern.
Budgeting is underrated and not taken seriously. Tabulating your spending manually is the best old school way to go about it. Every time you deposit funds in the bank, pay a bill or any other payment, assign a category in your notes with subtitles.
If you’re reading this to get an idea of how to make a budget on your spending pattern, follow the steps below:
1. Know How Much You Have
If you have savings, checking accounts, investment accounts, or any other financial instruments, you will want to know how much money is in each account as well as the interest rates and expenses of each one.
2. Know What You Owe
Determining your monthly recurring debt payments should be your next step. This should be fairly simple to do, as long as you have stopped incurring additional debt in the short term.
3. Determine Your Net Worth
Once you know how much money you have and how much you owe; you can easily determine your net worth.
4. Determine Your Average Recurring Monthly Expenses
This can be the hard part for many people. The best way to determine your monthly expenses is to make a stack of household expenses for a month. Maintain your receipts.
5. Make Adjustments Accordingly
If the bottom line of your budget proved that you are overspending your monthly income, you will come to the most difficult step – making cuts to your monthly expenses.
6. Adjust Categories Based on Reality
Life is full of surprises. Food gets more expensive, gas prices rise, and rent can get hiked when you least expect it. Each time you notice inflation creeping up on your expense categories, get a raise at work and begin to earn more money, or worse, suffer a financial setback like a pay cut or job loss, you must adjust your categorical expenses based on the realities of the world around you.