50/30/20 Rule
When it comes to budgeting, simpler is usually better, as you are less likely to stick with a complicated budgeting process. One common budgeting strategy is the 50/30/20 rule, which splits your spending by category: necessities, wants, and savings or debt repayment, respectively, using net income.
Calculating Income
After deciding on a budgeting strategy, the next step is to determine your monthly income. If you work for an employer as a full-time employee, all taxes will be deducted from your paychecks on your behalf, so you can use the resulting net income to create your budget. If you’re self-employed, you’ll need to deduct self-employment tax before calculating your monthly net income.
List All Your Expenses
After determining the money that comes into your bank account, identify what goes out of it. “You can do this by reviewing your credit card statements, as well as your bank account statements for the past three months to see where your money is going,” Henderson said. There are some fixed expenses that remain constant from month to month, and there are variable expenses that change frequently, such as food and entertainment. For variable expenses, it can be helpful to look at your receipts from the past few weeks or months and calculate an average.
Create and Track Your Budget
Now that you know the information you need to budget, it’s time to create the actual budget. Although you can easily track your monthly spending habits with pen and paper, there are several budgeting apps and computer programs that make this process easier.
The Mint app is one of the popular budgeting apps and is a favorite of Bednar because it is accessible and free. With Mint, along with most other apps, you’ll need to gather details about your financial accounts, such as credit cards and investments. This information will connect to the app and be viewable in one place, ensuring accuracy and timeliness of all tracked information. According to Bednar, Mint recommends a budget based on the information you provide, but you also have the option to customize it.
Source: https://www.thebalancemoney.com/creating-a-monthly-budget-316118
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