As easy as it sounds, taking control of your financial life starts with creating a simple budget.
What’s the purpose of a budget?
Taking control of your financial life starts with creating a simple budget.
A budget sounds restrictive, but budgeting is really about making choices.
A budget doesn’t just help you manage your expenses, it also serves as a plan to help you achieve your goals and dreams.
Financial Inflows and Outflows
A budget is mostly about identifying and controlling the inflows and outflows of your financial life.
Create a plan that results in your financial inflows exceeding your outflows. This way, you’ll have something left over— money that you can save toward achieving your personal goals.
Estimating your realistic expenses means taking account of everything that you are likely to spend money on, not just your regular monthly expenses.
For most people, there are actually three types of expenses: Bills, Habits, and Surprises.
It’s important to also budget for unexpected expenses.
What about goals?
Budget for your Goals—the things you are planning for in the future.
The big three savings goals for most people are a home, education, and retirement.
A goal might also be a vacation you want to take, furniture for your living room, or a new car.
Big goals can actually be achieved if you break them down into smaller chunks.
Shift small spending habits to small saving habits and you’ll be on your way to meeting your goals.
Understanding your earnings
Getting a handle on your earnings can be more challenging than it seems.
Even if it’s simple for you to understand how much you earn each month, you might have a partner or spouse that needs to be factored in to your overall household budget.
There’s a whole range of things that influence your take-home pay in addition to taxes and benefits.
Self-employed people need to budget for how much they earn, when they’ll get paid, and quarterly taxes.