Posts Tagged ‘set up a budget’

6 Steps To Create A Successful Budget Plan

Creating a budget plan is one of those things that strike fear into the hearts of people. Everybody knows budgeting is important, but very few people have it; worse, fewer maintain it. Is it such an overwhelming task? The answer is no. The problem is not with the task but with how you do it. If you follow the right steps, you will never fail. Following is a brief rundown on how to go about it.

Get A Clear Picture Of Your Income And Expenses

Budgeting is all about working on your income and expenses in a way that allows you to earn more (or at least save more) and spend less. So, the first thing that you have to do in order to create a budget plan is to find out how much money comes in every month and how much goes out. Bring together the records of the previous three months. For expenses, grab all the receipts, bills, and your checkbook register together. For income, assemble all the items that earn you money, such as dividend receipts, paycheck stubs, and any other such thing. This way, you will get a clear picture on how much money is coming in and how much is going out every month.

The Time Frame Of Your Budget

The next step is to determine if your is quarterly, monthly, weekly, or by the paycheck. This decision will very much depend on how often you get paid. Most people prefer to have a monthly budget, but it does not mean that you should also have the same. In your case, things might be different. For example, you may have certain expenses that occur quarterly or certain incomes that you get bi-weekly. So, you will have to plan accordingly.

Have A Method To Track Your Expenses

Tracking is a crucial part of successful budgeting. You can make this task very easy by using a free software tool. Depending upon how technically efficient you are, you may choose to work on MS Money or just a spreadsheet. If you are not comfortable with any of these things, you still have an option to use paper and pencil. The idea is to make sure you are able to track your expenses and even income (if it is irregular).

Create Categories

Depending upon how detail-oriented you want to be with your budget plan, you may like to have a multitude of categories or just a few ones; you may even use sub-categories if that makes things easier for you. Some examples of specific categories are dining out, food-groceries, car maintenance, fuel, auto insurance, and others. General categories may include utilities, insurance, medical, food, house, and auto. Keep your option open to add or remove subcategories or categories depending upon the changing situations.

Have An Emergency Fund

It is not wise at all to budget every single penny that you earn. After all, financial emergencies can hit you anytime. So, make sure you have an arrangement for emergency fund in your plan.

Flexibility

Things change with time. Therefore, it is important to have some room for flexibility in your plan. Review everything at frequent intervals and make adjustments to accommodate the changes.

Overall, if you follow this 6-step strategy, you will be able to create a budget plan that never fails.


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