Budgeting

Setting up a balanced budget is the first step to achieving financial success. Preparing an estimated monthly budget using past figures of income and expenses as a guideline is often the easiest and most useful way to create a sound budget. The steps listed below explain how to set up a budget and take the first step in financial planning.

Determining Net Income

To do this, take your monthly income minus any taxes and deductions such as; insurance, credit union membership dues, and advances. The amount left is your net income. While this figure may be depressing, it gives you a firm idea of what you have to work with and will help in setting and achieving realistic financial goals.

Determining Expenses

Figuring where you're money is going is a very important step in creating a successful budget. Many people are shocked at where the majority of their money is spent. Estimate how much spend each month on the following; rent or mortgage, utilities, maintenance, transportation, food, clothes, and entertainment. Don't forget to include those expenses which may be made quarterly or biannually, this includes; auto or home insurance, club memberships, taxes, etc. To ensure the success of your budget, make sure your expenses reflect what you actually spend as opposed to what you think you spend each month. If your budget doesn't already allow and expense for savings, it is important to start putting money aside each month to save or invest. It is recommended that a person designate 10% of their gross income each month to savings.