A budget is a plan for your future income and expenditures that you can use as a guideline for spending and saving. The foundation of financial success is the creation and maintenance of a sound budget. While in theory it’s an easy job, simply record all income and subtract for expenses then look at the bottom line. Either you have a surplus or deficit or maybe your budget is balanced. Typically, balancing a budget takes time and discipline and it’s not common that the first time you create a budget it will be balanced. It’s important to remember that budgeting is not a one-time thing but something you use throughout your life. As events and circumstances change so must your budget.
A budget is only as successful as you are honest with its contents. Budgeting requires a certain amount of forecasting and tracking. I am sure you can easily identify the obvious expenses such as, auto payments, rent, mortgage, utilities, etc. But it’s the in-between expenses that most forget to include in their budget. Items such as vacations, holidays, entertainment, clothing, auto repairs, incidentals, etc.
It’s important to start out with the tools necessary to succeed. A detailed budget worksheet will help to organize your income and expenses and reveal all expense items. If using a calculating budget worksheet your bottom line will change each time you make adjustments to your budget. This will allow you to see changes as you start to make adjustments. Start to collect your bills, bank statements, and receipts as this will help you to populate your budget. Budgets are mostly based on your monthly expenses so you may need to cultivate your budget over time as you collect this information.
If your expenses are greater than your income your budget’s bottom line will show a deficit. Conversely, if you are spending less than your income your bottom line will show a surplus. If you have a deficit you will need to start to trim some expenses and or increase your income. If you have a surplus you may want to consider adding to your savings and reserves. Your objective is to create balance within your budget.
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