How to Establish a Good Monthly Budget

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How to Establish a Good Monthly Budget

Do you often have too much month left at the end of your money? It’s a common problem in today’s world. Fortunately, you don’t have to reach the end of the month wondering where all of your money went. Doing a budget, and sticking it to it is a process that tracks your spending and how to allocate your funds. If you’re not great at budgeting yet, no problem. It takes a little time, but it’s worth the effort. These are the steps to establish a reasonable monthly budget.

Write Down Your Total Income for the Month

First, in the process of establishing a budget is writing down your total income for the month. It is your total after-tax take-home pay for both you and your spouse or domestic partner. Don’t forget to include everything, such as full-time jobs, second jobs, freelance pay, Social Security checks, child support, and any other ongoing sources of income.

List All of Your Expenses

Think about your regular bills, like your rent or mortgage payment, electricity, car payment, and your irregular bills like quarterly payments for insurance or HOA dues. Then, write them down along with the cost for that service. Then, write down your other variable costs, which includes things like food, gas, and entertainment. Every dollar you intend to spend should now be accounted for.

Subtract Your Expenses from Income

Once you subtract all your expenses from your income, you’ll be left with an amount (hopefully a positive number) that is often called discretionary spending. It’s wise to then allocate some of your discretionary income for saving. We recommend putting at least 20 percent of your monthly income into a savings account.

If you’re left with a negative amount, it’s time to make some changes to your budget until you can get the number down to zero. What expenses can you eliminate? For example, maybe you can sell your car and take the bus to work, or perhaps you can carpool. Maybe you can reduce your utilities somehow. If you still can’t get your leftover funds to at least zero, considering getting a part-time job or freelance gig.

Track Your Expenses Throughout the Month

Once you have established a budget, you’ll still need to stay on top of your expenses and track your spending throughout the month. The good news is that there are many useful budget apps available. EveryDollar and YNAB are both very popular, and they make tracking your expenses (and budgeting for them) extremely easy.

Now that you know how to establish an excellent monthly budget managing your money should be much more comfortable. Perhaps you can even start budgeting for a down payment on a new home! If making your dream of homeownership come true is in your future, give Primary Residential Mortgage a call. We can help you with your budgeting and credit repair so soon you’ll have a home of your own. Give us a call today! We are always happy to help.

 

Note: Opinions expressed are solely my own and do not express the views of my employer