Creating a monthly budget is one of the best ways to manage your money and help you achieve your financial goals.
A budget enables you to see what you’re spending your money on, allocate cash for the things that matter most, and save for the future.
Follow these steps to create your own.
How to make a budget
The first step is to take a look at your current spending. The Federal Trade Commission advises writing down your monthly expenses including bills such as rent, utilities and car insurance, along with other expenses like food, gas, entertainment and credit card payments. It provides a handy worksheet for the purpose.
Once you’ve done that, subtract your expenses from how much money you make, which includes both your paycheck and any other income.
You’ll then be able to make adjustments and plan how you spend your money going forward.
You may see parts of your budget where you’re overspending or decide to simply spend more money in some areas and less in others. Keep in mind that bills could change from month to month and some may be paid just once or twice a year. Look back at what you paid for a given month or period last year to get an idea of what’s ahead.
This is also a great time to work out whether you can save for the future. Life can be unpredictable and having money set aside for events like medical expenses or a reduction in income will put you in a better position to tackle the unexpected. Investopedia.com recommends creating an emergency fund to cover up to six months of expenses.
Think about your financial goals, too. Perhaps you want to save for a down payment on a new car or home, or for college tuition. Building that into your budget is a smart way to make it happen.
Explore more articles about managing your money across the Chrysler Capital blog.