Shaun Stenning said, Creating a budget is often the first step on the road to financial freedom. It sounds easy in theory, but in practice can be complicated with various tools and approaches to consider. How do you build a budget quickly so you can get started reaping the benefits right away?
Many people think that budgeting is really complex. It's not. All you have to do is generate a spending plan and then try to follow it as best you can.
"The reason why you create a spending plan is to prevent yourself from spending more money than you earn. For a budget to work, you just review your progress at the end of each month to see how you are doing. If you spent more than your spending plan called for, then you need to either adjust your spending, increase your income or adjust your budget." Shaun Stenning said.
If you would like to put together a simple budget (or spending plan, as some call it), just follow these three steps:
Step One
Start by gathering your credit card and bank statements for the last month so you can see what your living expenses are.
Then take a blank sheet of paper and write down these headings: Housing Expenses, Living Expenses, Work Expenses, Personal Expenses, and Payments. Under each of these categories, write down the expenses that you see recorded on your statements.
Finally, add up all of your expenses from the different categories.
Step Two
According to Shaun Stenning, "To fully understand your situation, this next step is extremely important. Compare the amount that you are spending in a month to your income for that month (to find out how much you are spending each month, just add up all of the monthly expenses in the budget outline you just created)"
To find out what your monthly income is simply use your bank statement to add up the deposits in your bank account. If you feel trapped and you are living on credit, then you will probably notice that your monthly expenses are more than your monthly income. If you continue like this, you are headed for financial disaster.
Step Three
Decrease your expenses. When you look over your budget, you should be able to find areas that you can probably cut back. If you just cut back a small amount in a few areas, you will probably be surprised by how much money you can free up.
Increase your income. Could you work more overtime, take on a second job, take in a student or rent out the spare room?
Do both. Decrease your expenses and increase your income. If you can do both, you can potentially make some serious progress in reversing your situation.
To fully understand your situation, this next step is extremely important. Compare the amount that you are spending in a month to your income for that month (to find out how much you are spending each month, just add up all of the monthly expenses in the budget outline you just created). To find out what your monthly income is simply use your bank statement to add up the deposits in your bank account. If you feel trapped and you are living on credit, then you will probably notice that your monthly expenses are more than your monthly income. If you continue like this, you are headed for financial disaster.
So here is how you can fix your situation and get out of your debt trap. You will need to work on one of these three options.
However, you choose to free up existing income or generate more income, try not to use too much of your newfound income to improve your lifestyle until you have paid off your debts. Living within your means and paying off your debt won’t be quick and easy. It took a while to get into debt, and it’ll take a while to get back out again. Re-examine your priorities, tell yourself you can do it, and dig in.
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