This doesn’t mean that every penny of your income has to be spent. This budgeting method requires that you designate how each dollar of your income will be used.įor example, if your income is $5,000 per month, you will need to identify how that $5,000 will be used-down to the last penny. The concept of a zero-based budget is quite simple. The two most widely used budgeting methods are the zero-based budgeting method and the 50/20/30 budgeting method. Once you’ve reviewed your numbers, it’s time to decide on a budget method going forward. You don’t have to get that specific, although it brings greater visibility to what you’re spending on. In fact, our budget has about 90 line items of expenses that we use throughout the year. Within these categories, you can get even more granular. You are accounting for every dollar that comes into your household, so all income needs to be included.Įxpenses will vary by household however, there are some general categories that your expenses will fall into. You’ll also want to include any side hustle income that you or your spouse make. This would include large windfalls of money, such as a tax refund or bonus, passive income, alimony/child support, and any miscellaneous income (gifts, refunds, etc.). When budgeting, you need to consider all of your income sources, not just your job. The first is your income and the second is expenses. There are two main categories when it comes to budgeting. That’s how they stay in the cycle of being in debt and living paycheck to paycheck.īudgeting will help you see this in advance so that you can make adjustments to your spending. Use them to identify what you spend money on a monthly basis and how much your expenses sum up to be.įor most families it is and they aren’t even aware. To get a good understanding of how much you actually spend, download your past 3 months’ bank statements. Typically, your expenses are the same month to month.įor example, your cable bill will likely not change between months, nor will your mortgage. This is how much money you have to cover your expenses each month.ĭo not include credit card limits. Your income is every dollar that is coming into your household.Ĭalculate what that is on a monthly basis. Review income and expensesĪfter you have established your financial goals, the next thing you need to do is to review your income and expenses. Ultimately, you’ll want to determine your goals with your spouse and make sure that you’re on the same page. Those are just a few ideas to get your brain going. If you’re stumped on what that should be, here are some ideas: So before you even create your budget, you need to determine what your family’s financial goals are. So now that you know why it’s important to create a family budget, it’s time to actually make one. Having a shared budget puts (and keeps) you on the same page as your spouse when it comes to your financial priorities and spending. Ultimately, these money disagreements can end in divorce.Īlthough there are many things that can contribute to financial disagreements in relationships, a budget can help you get on the same page when it comes to how you manage your money. It’s no secret that arguments about money is one of the leading causes of stress in relationships. It reduces arguments about money with your spouse So if you want financial freedom, it begins with budgeting your money. This takes away your financial freedom and your money now controls your life. This means that you can end up spending above your means and even get into debt. You have complete control over how your money is spent and what you put it toward.Ĭontrarily, when you don’t have a plan for your money it can control you. When you budget, you are telling your money where it needs to go. One of the intrinsic benefits of budgeting is that you have control over your finances. It gives you control of your finances and financial freedom That’s why having one can help you achieve them. If you want to have your dream vacation, you can budget for it.Ī budget is not only at the center of your financial goals, but also your life goals. If you want to buy a house, you can budget for it. If you want to travel, you can budget for it. So making sure your finances align with your life goals is important. Without money, you may not be able to do many of the things that you may desire to do. Ultimately, budgeting helps you plan for the life that you want. Having a budget allows you to see how much money you can put towards these goals and create a timeline to achieve them. It’s a plan to help you navigate life and to reach your goals. Utlimately, your budget is a reflection of your financial goals.įor example, if your goal is to pay off debt, then you’ll allocate money in your budget for debt payoff.Īt the end of the day, a budget is simply a plan for your money.
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