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Finance

How to Create Your First Budget

Sitting down to create your first budget can be a little daunting. However, it can lead you to financial success if done right, and financial headache if done wrong if not at all. So, you have to know what you are doing when you do sit down with your finances. This is how to create your first budget.

Figure Out Your Income

money coins time

You need to look at all sources of income. If you only have one, this will be easy. Most people only have one, or maybe two, from regular jobs. However, if you work from home, you could have income from several avenues. If you are a freelancer or work from home for several companies or people, your income could be more complicated.

Figure Out Fixed Expenses

real estate house

Fixed expenses are the ones that you know won’t change. Car payments, car insurance, your rent or mortgage payment, and other loan payments usually don’t change over time. If you know you always pay the same amount on your credit card, you can also consider this a fixed expense if you’d like. What you spend on food each month should roughly be a fixed expense because you know how much you always spend. Set aside the same amount each month and what you don’t spend can be put aside for next month or go to savings.

Factor in Variable Expenses

energy power

Variable expenses are ones that change. Your credit card payment usually changes based on your balance. Your utilities change based on usage. You can usually estimate these payments yourself by looking at the usage meters on utility bills and giving yourself an average or always going with the highest (depending on how you’d like to budget), and by always paying the same amount on a credit card going with the highest your payment has always been and rounding up.

Give Yourself a Savings Expense

piggy bank money

You should always save money each month. However, it should be within your means according to your income and what you already have for expenses. If you can only put aside $10, that is okay. However, if you can put aside $100, that is even better. Whatever you can afford will help you down the road when you need it the most when things come up that require a little extra money that you might not have had otherwise.

Figure Out Your “System”

calculator pen paper

How will you track your income and expenses? Some people just write it all down on a piece of paper each month and they track it that way. It works for them. Other people are a little more tech-savvy and they track it all in a spreadsheet on the computer. Still others actually have software that helps them track every income source and expense so they know where every dime comes from and is going. Whatever system works for you, works for you. But you have to try several before you find one usually.

Setting up your very first budget usually isn’t easy. Doing anything for the first time usually isn’t easy. However, as things change for you financially and you update or redo your budget, you will find your budget easier to do. You will find that a budget is easier to follow when you allow for “oopsies” and give yourself breathing room.

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