How to Make a Monthly Budget That Works

For many of us, spending comes all too easily and before long, we find ourselves at the bottom of a very big debt hole. However, there are ways that anyone can make a budget and start planning for their future. You may not even need to make drastic changes right now, but the more you put away, the less you’re going to have to work later in your life. That is really the best way to look at budgeting. Sure, it may be a little tough right now, but you may be allowing yourself the ability to retire happily at 60, instead of having to slave away well into your 70’s, just to make ends meet.

So, let’s look at some easy ways to make a budget that won’t hit too hard at first. You’ll need to add up all of the income that you’re bringing in each month. Make sure that you don’t include the money you pay for taxes – just take the amount that your paycheck is for each month. This is what you have to work with.

Now, add up what you spend on rent or a house payment. It should not be more than 30% of your monthly income. Ideally, it should be around 10%, but that is not always possible. If you are spending more than 30%, you may need to look at getting a cheaper place, or even getting roommates to bring that amount back into the accepted range. Your car payment is next – if it’s too high, consider getting a cheaper car.

After this, add up all of your other essentials, such as your utility and phone bills. If you’re spending too much, look into other companies that may have lower rates. However, with the exception of long-distance fees, most of us can’t really do much about our utility bills. Next up, groceries and other essentials. Figure out how much you spend every month on these. If it’s high, try substituting with other brands or visit a store that is not so expensive.

Now that you’ve gone over the essentials, it’s time to look at your nonessentials. This is where many of us easily spend a few hundred every month without even thinking about it. How much money do you spend on dining out, drinking, or having fun? We’re not saying hole up in your house and never leave, but you may need to cut back a bit. Try to find ways to cut your nonessentials by around $200 to $500 a month. This frees up quite a bit of money that should be deposited into a savings account every month. If you can do more than $500, great, but many of us just don’t have that kind of cash. At the end of the year, you’ll end up with more than $6000 in savings – and that is significant for many people. You’ll also need to work on finding ways to increase your income so that you have more freedom to save and spend.

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