If your salary always seems to find wings and disappear in the middle of the month, it is time for a rethink. You should take a look at your financial habits to see where you are getting it wrong. After finding out the reasons behind your poor financial state, you should take action that matters.
Creating a budget is the first step to financial stability. It helps you monitor your spending and determine your exact disposable income. We take you through a straightforward guide to creating a budget that works.
What comes in
The first step to creating a successful budget is to get a full picture of all your income. Sit down and calculate all sources of income. Include the money from your side gigs and return on investments outside your salary.
What keeps taking
After determining what your total income is, your attention should shift to your expenses. Tackle your fixed expenses first. Your fixed expenses are expenses that you incur every month without fail. They include your rent, cable TV subscription and car repayments.
What takes quietly
After considering your fixed expenses, turn your attention to variable expenses you incur monthly. Variable expenses are less predictable with no fixed amount. It encompasses the amount spent eating out, fueling your car or buying food stuff. Getting a clear picture of your variable expenses might require you hunting down receipts and payment slips.
What you have left
With an estimate of your expenses comes the moment of truth. with this figure you can see where you stand financially. Subtract all your expenses from your income to see what you have left. If the figure is positive, you are good to go. If your figure is negative, it means you are living above your means and need to correct this.
What you have to do
If you are in the red, you need to cut down on your expenses immediately. Look out for ways to reduce how much you spend. If your car’s fuel consumption is unsustainable, start sharing a ride with colleagues for a couple of days in the week. You can also cut down on eating out and pack a lunch to work.
With these steps, you can create a budget that will actually work because you have the right foundation.