When was the last time you looked at your bank statement? For some, the answer is never! In reality, knowing where your money is going and regularly setting financial goals for yourself is essential to achieving confidence in your money decisions and reaching key life milestones. Luckily you don’t need a financial advisor to build a budget for your lifestyle; you only need to follow these five simple steps.
Step 1. Start with your net income
Building out a budget should begin with seeing what you have to work with. That starting point is your net income, or how much money you actually take home after expenses. If your paycheck automatically deducts things like taxes, retirement, and employer-based insurance, then your net take-home pay is your net income. If those deductions aren’t already taken out, you’ll need to subtract them from your pay to determine your net income for the purpose of budgeting.
You’ll be creating a monthly budget, so be sure to calculate what your net income is per month (which may not be the same as per paycheck).
Step 2. Write down where your money is going
Next, you’ll need to set a baseline for your budget. Start by writing down all of your expenses you may incur during a month. If you’re not sure where all of your money is going, spend the next month tracking your spending so you can create a general picture. We recommend using a spreadsheet or application to track your expenses, but there are also free budgeting worksheets online that can help with this, too.
Some expenses may change each month…Read More