Build a budget today! It is such an empowering feeling to be in control of your finances, and to cover an emergency when it arises. Setting up a budget is a very powerful tool for obtaining wealth, even on a minimum-wage job. Set up your first budget with these easy steps.
1. Determine your income. Add up your total monthly income from all sources. You need to know how much you make to know whether you can cover your expenses. It sounds basic, but many people don't do this.
2. Determine your fixed expenses, including savings. Which items won't change from month to month? Your rent, car payments, student loans-and savings. Don't forget that category. If you plan on obtaining wealth, this is an important category for setting up your budget. Start out by automatically transferring ten percent of your income into a savings account, no matter how small that amount seems.
3. Determine your variable expenses. Now that you've figured out your fixed expenses, it's time to figure out your variable expenses. These expenses may change over time-groceries, clothing, eating out, entertainment-and they're the first expenses you can cut if you aren't living within your means.
4. Expenses versus income. Now, the fun part. Add up your monthly income; add up your monthly fixed and variable expenses; and subtract the second number from the first. If you're in the black, congrats!
If you're in the red, time to cut back. The idea is to create a budget that matches your income. If it doesn't, look at those variable expenses to see what you can cut-and consider some moonlighting or freelancing, too.
The first time you do this, you might be shocked by the figures - especially if you make daily trips to your local coffee shop - but it will get better. It takes a good three months to set up a solid working budget. Track your daily expenses, keep adding to that savings account, and reevaluate your budget every month. You'll soon see that you're making your money work for you.
A well known personal finance blogger, Christine McCarthy provides people tips and stories for managing your personal finances. Visit her Money Funk blog at http://www.moneyfunk.net to help you improve your financial life.
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