Keeping track of finances is a major key to economic stability. By tracking your monthly expenses, you can have a better understanding of how you actually spend your money. For many people, this process of creating and sticking to a budget is overwhelming. This is when a few simple tips may come in handy:
- Keep track of monthly spending: Just like they can teach in finance school, you cannot form your budget unless you have a detailed account of how you spend your money.
- Determine your goals: When creating a financial budget, it is important to set your goals. Are you trying to retire early, or are you just tired of living paycheck to paycheck? Understanding your short- and long-term goals will help direct your budget.
- List your major expenses: After tracking your spending habits for at least a month, make a list of your major expenses. From your weekly gas expense to your mortgage payment, this list should include every expense that is an absolute necessity.
- List all other expenses: Every other expense that is not an absolute necessity should be listed here. This should include items like clothing and entertainment.
- Calculate your income: Before you can even begin to form a budget, you need to have a complete understanding of your income. Include everything, even interest earned from savings accounts and investments.
- Calculate the budget: After you have an understanding of where and how you spend your money, it is time to create the actual budget. Make sure you include a place for emergency funds.
- Re-evaluate your expenses: In the world of finance, there is a continuous re-evaluation process. If after a month or two of following your budget you find that your checkbook is still in the red, you will need to re-evaluate your expenses.
- Be realistic: You have to be realistic with your finances. For instance, you cannot just set your entertainment budget at zero. These budgeted expenses need to be attainable.
- Pay down debt: Even if your long-term goal is early retirement, some portion of your budget should go towards paying down debt.
- Be accurate: If you were enrolled in a finance program, you could learn that figures do not lie. Make sure that you accurately keep track of all your monthly expenses.
For an opportunity to better understand the world of budgeting, enroll in a degree program that specializes in finance.
This article is presented by AIU. Contact us today if you’re interested in an opportunity to develop knowledge and relevant skills with an industry-current degree program from AIU.