Budgeting may seem daunting, but it is an essential component to taking control of your finances and meeting large goals, such as buying a house, paying for your child’s education or getting out of debt.
Creating a budget will help you determine whether you are spending more money than you are earning, and where you can cut unnecessary spending.
First, identify how much you are spending in the following categories: groceries, transportation, clothes, rent, utilities, entertainment/restaurants, insurance/medical expenses, childcare and miscellaneous. Track expenses by saving all receipts for a month and totaling how much is spent in each category at month’s end.
After tracking your expenses, determine where you can cut or decrease spending to increase your savings to at least 10% of your monthly income. For example, instead of buying lunch out every workday, you could bring a lunch from home and save $40 or more per week, and over $2,000 per year!
Increasing your savings will allow you to create an emergency fund to avoid going into debt over unexpected situations – such as the sudden loss of a job or unforeseen medical expenses – and also allow you to work toward achieving your goals.
Once you have decided how much money you should spend in each category, track your purchases and payments every month to ensure you stay within the guidelines you have created. Concentrate the most on the categories where you have decided to decrease spending, and note progress toward your goals.
Once your budget is in place, you may find that you need to alter it slightly within the first few months. Keep in mind that adjusting to a budget takes time, and that if you keep with it, tracking expenses will soon become routine.
Free Financial Counseling
If you would like help setting up a budget or getting out of debt, free bilingual financial counseling is provided at Mi Casa Resource Center through mpowered. To learn more or set up a free appointment, call 720-944-2498.