According to the American Psychological Association's 2020 survey, which measures causes of stress, 73% of households with incomes less than $50k and 59% of households with incomes greater than $50k, report money as a significant source of stress. One in three U.S. adults loses sleep over financial issues, according to the Business Insider Personal Finance article. Although the reason may differ from generation to generation, the most significant money stressor is overspending on everyday expenses. When monthly expenses exceed total take-home pay, debt and stress rise. Creating a monthly budget can help you stay on track; stopping you from spending more than you make and helping you avoid additional debt.
Creating a monthly budget may seem like a daunting task, but it is simply a tool that helps you track your income and expenses. It can reduce future financial worries by helping you plan monthly expenses, spend only what you can afford, and help you save for unexpected or large expenses.
Knowing how much money you have to spend and whether or not your bills have been paid, is surprisingly powerful. Having a budget gives you the information you need to take control of your money.
If you need a budget, use these five tips to get started:
Creating a monthly budget may seem like a daunting task, but it is simply a tool that helps you track your income and expenses. It can reduce future financial worries by helping you plan monthly expenses, spend only what you can afford, and help you save for unexpected or large expenses.
Keep track of all your expenses for a month (you can save receipts in a shoebox) or do your best to come up with a ballpark estimate of how much you spend and what you spend it on. Tracking your expenses is key to creating a budget that works. If you take the time upfront it will pay off down the road. Start by tracking all your expenses for one to three months (you can save receipts in a shoebox.) Look at receipts, review your bank and credit card statements; whatever allows you to come up with a ballpark estimate of how much you spend and what you spend it on.
Continue recording your expenses and track every dime you spend (even on a tin of mints) each month after starting your budget. Don't put this task off; set aside time each week or month to make sure it gets done.
Dividing your monthly expenses into categories allows you to track your spending. Create as many or as few categories as you think you can manage. This will help you track your spending. Don't forget quarterly or annual expenses.
Your budget will be unique to your lifestyle and spending habits. Most budgets include categories such as utilities, mortgage/rent, taxes, insurance, medical, travel and fuel, clothes, food, and entertainment. As you get a better feel for your spending and saving habits, the amount you allot to each category can be adjusted each month.
Your budget will be unique to your lifestyle and spending habits, but most budgets include categories such as utilities, mortgage or rent, taxes, and insurance, medical, travel and fuel, clothes, food, and entertainment. As you get a better feel for your spending and savings habits, the amount you allot for each category in your budget can be adjusted each month.
Your monthly income includes your take home pay, tips, interest, and investment income. Determine a total and create your budget based on this amount. Your total income minus the amounts you plan to spend or put into savings for each expense category (total expenses) should equal zero, ensuring every cent is accounted for.
Do not forget to include infrequent expenses, an emergency savings fund, and maybe even a future vacation fund.
Set calendar alerts for days when you need to pay bills to ensure you never miss a payment and avoid adding late fees to your monthly expenses. Consider setting up automatic payment or use your bank's bill payment service for recurring expenses.
If you need a budget and have more questions or would like more information about options for handling emergency expenses, contact us today. The easy part is creating a budget plan. The hard part is tracking your monthly expenses and taking control of your spending. Remember to set realistic goals, plan ahead (even for emergencies), and limit your credit card spending.