Everyone, regardless of income level, can benefit from a good, hard look at where they stand with their finances. A very important first step toward getting a handle on your own financial situation is to create a budget. This does not have to be an intimidating step.
To start, just create a spreadsheet or record your monetary activities over a month’s time, while spending is as usual. Include money that is both coming in and going out. Consider categories such as:
- Distribution or allowance
- Medical Expenses
- School Expenses
- Credit Card Payments
- Insurance (home, auto, etc.)
- Loan payments (auto, student, etc.)
After tracking activities for a month, you may be shocked by how much is spent in certain categories. Have no fear, some may be tweaked quickly to improve your financial situation. Examples of some short-term changes include:
Problem: “I’m spending too much of my income on restaurants and bars”
Solution: Consider “dining out” less and making more meals at home.
Problem: “All of my income is maintaining only the bare necessities of my and my family’s life; I can never get ahead or enjoy myself because of medical debt”
Solution: Consider contacting your creditors and asking for payment arrangements or a negotiated discount. If you have a budget on hand, it will drastically improve your chances of a favorable result. Alternatively, consider researching government assistance programs available for those who cannot make ends meet despite their best efforts.
Some Guidelines for Expenses
- If your monthly mortgage/rent is more than 30% of your take-home pay, consider options to reduce your living expenses (i.e. moving somewhere more affordable, subleasing a room)
- If your monthly car expenses are more than 15%, consider options to reduce your transportation expenses (i.e. selling an expensive vehicle for a high-quality used vehicle)
- If your grocery and food expenses are more than $300 per person per month, consider buying in bulk, going to less expensive grocery stores, and/or dining out less frequently.
Of course, these guidelines may not possible for everyone; they are merely suggestions of what to help reach your financial potential.
Whether you’re living paycheck to paycheck, are deep in debt, are a trust fund baby or raking in cash through day trading, creating a budget is a valuable first step in the journey to ensuring financial stability into retirement and for the rest of your life.
There are endless resources available for creating a budget. Apps, websites, programs and of course—pen and paper. To jump start your budgeting process, download our free expense tracker and monthly budget summary here. Or, if you want to walk through it step by step, we’re here to help!
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