Do you find yourself wondering each month, “Where does my money go?”. If so, Claire’s Clarity is here to show you how to create a monthly budget that will help you better manage your finances. With Claire’s help you’ll understand how much money you really have after paying all of your bills while also learning how to save that money to create a healthier financial future for yourself.
The most important thing to remember when you start creating your budget is that you shouldn’t expect it to run smoothly the first month or two. It usually takes a few months for you to get a good feel of where all your money is going, as well as which expenses are necessary as opposed to those that aren’t. Be patient with your budget because in no time you’ll have it down and you’ll be amazed at all the money you can save! 1. Determine your estimated monthly income This means that you should add together all of your take-home (after tax) income, as well as the income of your spouse or significant other if you are budgeting together. Don’t forget to include everything; this means full-time jobs, part-time jobs, freelance gigs, even royalties from your pet Chihuahua’s acting gig. Any ongoing source of income should be factored into your estimated monthly income. 2. Create a list of all your expenses Start with your regular monthly bills (mortgage, electricity, etc.) and then any irregular bills (for instance a quarterly insurance payment) that will be due in the upcoming month. After that, tack on any other costs, like gas, food, entertainment, food, and anything else that comes to mind (like food). Every dollar you plan on spending should be accounted for.
3. Subtract income from expenses to equal zero The type of budget you are creating is called a zero-based budget. That means that you are basically assuming that your income minus your expenses should equal zero. By using a zero-based budget you can easily learn about your financial health. Did you find that your revenues were higher than your expenses? Great! You are living within your means and you could even start putting away that extra money in a savings account. Are your expenses creeping up higher than your monthly revenue? It may be time to make some tough choices about how you are spending your money. If you are spending too much, look at your budget and think about which non-essential expenses you can reduce or even get rid of all together like eating out or buying more tutus for the Chihuahua (that is unless it’s for a paying gig). 4. Track your expenses throughout the month Throughout the month, check your expenses periodically to make sure you are staying on track. Try and maintain your current spending habits even if you think you have more than enough money, it’s better to have some money left over to save, then not enough to pay your bills!