Start a budget by gathering your bills and pay stubs. Think about how you spend money, besides paying your bills. For example, do you buy a cup of coffee every day? After a month, that coffee money could add up to an expense you might write down.
When you have your bills and pay stubs:
write down your expenses. An expense is money you spend
write down how much money you make. This is called income
subtract your expenses from how much money you make
If the number is less than zero, you are spending more money than you make. Look for things in your budget you can change. Maybe something you do not need, or a way to spend less.
divide that number by 12. This is about how much money you will have for each month
For Example
Last year my paychecks added up to $30,000. $30,000 ÷ 12 = $2,500 I had about $2,500 each month.
How can I use my budget?
A budget is something you use every month. A written budget will help you:
see where you spend money
see where you can save
make a plan for how to spend and save your money
Your budget can help you save money for the future. You can make savings one of your expenses. You might find ways to spend less money. Then you can put money into savings every month – maybe into a bank or credit union.
Why should I save money?
It can be hard to save money. It is very hard when your expenses go up and your income does not. Here are some reasons to try to save money even when it is not easy.
Emergencies – Saving small amounts of money now might help you later. Everyone has expenses they do not expect.
Expensive things – Sometimes, we have to pay for expensive things – like a car, a trip, or a security deposit on an apartment. You will have more choices if you have money to pay for those expensive things.
Your goals – You might want to pay for college classes. Maybe you need to visit family in another country. You can plan for these goals and save money. Then you might not have to use a credit card or borrow money to pay.
How else can I save money?
You can try these ways to help save money:
For one month, write down everything you spend. Small expenses, like a cup of coffee, can add up to a lot of money. When you know where you are spending your money, you can decide what you might not want to buy.
Pay with your credit card only if you can pay the full amount when the bill comes. That way, you do not pay interest on what you owe.
Pay your bills when they are due. That way, you will not owe late fees or other charges.
Keep the money you are saving separate from the money you spend.
Consider opening a savings account in a bank or credit union. Read more about opening a bank account.
If you keep cash at home, keep the money you are saving separate from your spending money. Keep all your cash someplace safe.
How to Answer It. Discuss your process for creating a budget, including how you forecast costs, allocate funds, and monitor spending. Emphasize your analytical skills and how you ensure financial efficiency and accountability.
For example, your budget might show that you spend $100 on clothes every month. You might decide you can spend $50 on clothes. You can use the rest of the money to pay bills or to save for something else.
Go ahead and share your budget estimate, even if it's a broad range. Cite a high- and low-end, or give a more specific figure if you're comfortable doing so. If your budget depends on a variety of factors, be open about that. What considerations will impact how much you can spend?
Having strong budgeting skills means being good at looking at your income, figuring out necessary expenses, and making sure there is money set aside for savings and unexpected costs. This skill helps individuals avoid overspending and falling into debt, while also securing a financial safety net for the future.
The 50/30/20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should be split between savings and debt repayment (20%) and everything else that you might want (30%).
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
Whether or not you have a partner, start your budget by listing all your anticipated monthly expenses. It can be helpful to divide them by how frequently they occur. Insert your monthly income and your monthly and yearly expenses to find out your net monthly and yearly income.
Start by determining your take-home (net) income, then take a pulse on your current spending. Finally, apply the 50/30/20 budget principles: 50% toward needs, 30% toward wants and 20% toward savings and debt repayment.
Introduction: My name is Arline Emard IV, I am a cheerful, gorgeous, colorful, joyous, excited, super, inquisitive person who loves writing and wants to share my knowledge and understanding with you.
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