Many people have no idea what their actual income and expenses are. A good budget can help you figure it out. Budgeting is especially important if you are trying to get rid of debt, trying to save for your family’s future, or just to make sure you are spending your hard earned money wisely. It will also make you feel much more secure to know exactly where your money is going.
First Step: Figure out Your Take-Home Pay
If you get a regular paycheck, this should be easy enough to figure out. If you get overtime here and there, I recommend to plan your budget on your base pay so that you are not overestimating the amount you take home. Overtime is not guaranteed. If your income comes from another source, like social security or retirement, this should be easy enough to figure as well.
Second Step: Make a Budgeting Plan
There are a few different ways you can choose to budget. One budgeting method is called the 50/30/20 budget. 50% of your income goes to necessities, 30% goes to wants, and 20% goes to savings or debt repayment. If you have a lot of debt, it might be that you might have to “borrow” from the wants category to make headway. Another budgeting method is the envelope system. You literally put the money that you allocate for each spending category in an envelope, and you have to ration that money out through the month.
Another budgeting method is the zero-sum budget. You basically make a budget that allocates each dollar that comes into a specific category. This is what I personally do. For example, you make $2000 a month, your budget might be:
- $500 for rent
- $300 for groceries
- $200 for utilities
- $50 for eating out
- $50 for entertainment
- $100 for car insurance
- $200 for car payment
- $150 for gas
- $50 for clothing
- $150 for paying down debt
- $150 for emergency fund
- $100 for miscellaneous
For any of these methods, it will be helpful to look at your past spending to see what you are already spending in these categories. It will likely be more than you think!
Third Step: Track Your Progress
Fourth Step: Automate Savings
Automate as much as you can so that you are not tempted to use savings for other things. Get the money that will go into your savings deposited directly into a separate account so that it will get there with minimal effort.
Fifth Step: Continue to Revisit Your Budget
As time goes on, continue to revisit and revise your budget. Life changes, income changes, and priorities change. Your budget needs to be changing and growing as your life experiences changes.
Contact a Trusted Bankruptcy Attorney Today
I hope this is helpful. Sometimes it makes sense to make bankruptcy part of your budget as well. Here at Bond & Botes, we help people get their lives back on track. If you would like to set up a free consultation to discuss if bankruptcy is right for you, please contact one of our offices today.
Kathryn Davis is an attorney at the Bond & Botes Law Offices in Huntsville and Decatur, Alabama. She holds a Bachelor of Arts from Auburn University, and a Juris Doctorate from Samford University, Cumberland School of Law. She is passionate about utilizing the bankruptcy process to help clients navigate through what is usually some of the lowest points in their lives. Read her full bio here.