Take it from me?I have not been the best at budgeting. There?s this aspect of having to document everything that I never seem to do so well at unless I have a nifty accounting software system to use.
But budgets do have their purpose, and can be vital to reining in an out-of-control financial situation. Why, you may ask? A budget can help you to know how much money you make, how much your expenses are, how much disposable income you have available, how much that you can devote to saving and/or investing, and how various life changes will affect your finances. Even though you use a budget to assess your current situation, it often serves as an important planning tool for the future as well.
The first part of a budget is pretty elementary, but extremely important?how much income do you make? In other words, how much money do you have to spend each month? You need to figure out how much pay that you bring in on a monthly basis from all available and routine sources. ?If the number varies from month to month (as in commission or project-based employment situations, for example), you should use an average, or even to be safe, the lower side of the spectrum.? Make sure that the number you use is your net amount, and not gross.? It does not matter if you technically make $4,000 per month (gross pay) if, after taxes, insurance premiums, and other paycheck deductions, you are only left with $3,000 to actually spend (net pay).? Accuracy is important here, as, if your income amount is incorrect, your whole budget will be off.
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