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7 Steps to Budgeting
Transcript of 7 Steps to Budgeting
Check back periodically.
a. Be sure to review your budget regularly.
b. Does the plan still meet your needs and help you achieve your goals? If not, make some adjustments or create a new budget that better meets your needs.
Pay yourself first!
a. Saving is a very important part of protecting yourself financially.
b. Save as much as you can every month. Even a small amount can make a big difference if you keep it up.
c. A great goal is to establish an emergency savings fund large enough to cover three to six months of your living expenses.
d. After you have an emergency fund, your savings can go toward meeting your goals.
Create your budget.
a. Think of your budget as a “spending plan,” a way to be aware of how much money you have, where it needs to go, and how much, if any, is left over.
b. Your budget should meet your "needs" first, then the “wants” that you can afford.
c. Your expenses should be less than or equal to your total income.
d. If your income is not enough to cover your expenses, adjust your budget (and your spending!) by deciding which expenses can be reduced.
Determine your income.
a. Figure your available income (the amount of your take-home, or net, pay).
b. Do not include overtime pay, because you shouldn’t rely on that as regular income.
Make a list of your values. Write down what matters to you and then put your values in order.
7 Steps to Budgeting
Set Your Goals. Make sure you know what you are going for.
a. Write down your goals.
b. Think about what you want to accomplish financially in the next three months, the next year, and the next three years.
Determine your expenses.
a. Review your checkbook register, credit card statements, store receipts, and more. Where is your money really going?
b. "Fixed expenses," such as a rent, auto, or student loan payments, are easy to determine.
c. "Flexible expenses," such as food, clothing, and entertainment, vary from month to month.
d. Don't forget about expenses, such as taxes or insurance, that are billed quarterly, semi-annually, or yearly.
e. Look into personal finance software programs that offer a budgeting feature to help you track these expenses.