Organize your finances through a personal budget

If you are thinking of making a spreadsheet of personal budget for your expenses, or you just want to better understand your money management, you should start with these five essential steps.

Even if you don't use a budget spreadsheet, you probably need some way to determine where your money is going. Thus, using templates can be of great help so that you can be in control of your financial life.

Furthermore, this strategy It will allow you to save so you can achieve your goals. Finding a way to track finances is the big trick. Here are the steps that can help you make a good budget.

5 steps to make your personal budget

Step 1: Write down your net income

To create a good budget, the first step is to identify how much you earn. However, it is important to remember that your salary is not equivalent to what you can spend, since there are essential expenses and also the debts that we all have.

So, when making your budget, you must subtract from your salary the values of taxes, social security, among other accounts. The amount after deductions will be your net income, it is also the number you will use to create your personal budget.

Tip: If you have a hobby or talent, you may be able to find a way to supplement your income. Having a source of extra income can also come in handy if you ever lose your job.

Step 2: Control your expenses

Tracking and categorizing your expenses is helpful in identifying where adjustments can be made. This will be of great help to know in which aspects you are spending the most money, also where you could cut back more easily.

Start by making a list of your expenses that are fixed, such as utilities, rent, mortgage, or car payments. It's unlikely you'll be able to cut these expenses, but it's helpful to know how much they take up your salary.

Next, list your most variable expenses, such as food, entertainment, and gas. In these expenses you can find ways to cut back. Bank and credit card statements are good starting points, as they often detail or categorize your expenses for the month.

Tip: Record your daily expenses with what you can: a pen and paper, an app, or your smartphone. You can use this spending and budgeting tool if you have a Bank of America account.

Step 3: Set your goals

Before you start examining the data you have, create a list of all the financial goals you want to achieve both in the short and long term. Short-term goals should not take about a year to achieve.

On the other hand, long-term ones can take 2 or more years. The important thing is to identify which goal has the highest priority so that you can make your budget.

Step 4: Make a plan

Use the information you compiled to help you understand how you will spend your money in the coming months. You can fairly accurately predict your fixed expenses. Use your past expenses as a guide to try to predict variable expenses.

Step 5: Change your habits when necessary

Now you have everything you need to make a good personal budget. Having documented your expenses and income, you can begin to see where some money is left over or where you can cut back.

The desire to buy is the first thing you should look for as you cut back. Evaluate your expenses in needs. For example, if you need Internet at home, if possible, you can contract a cheaper service, instead of contracting the fastest.

Such decisions come with big trade-offs, so be sure to carefully weigh your options.

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