Before starting a budget there are a couple of things you should consider:
A budget or spending plan is a financial overview of how much money is coming in and how much is going out on a monthly basis.
A budget or spending plan can help prevent overspending by identifying where your money is actually going.
You should set short term and long term financial goals:
Goals help you move forward financially.
Achieving a short term goal can give you the confidence and motivation to stay on track.
Long term goals help to establish vision. Your long term goal should be achievable, believable and conceivable.
The first thing you need to do is get your household income and expenses together, which include:
- Paycheck stubs, including "odd job" information and bonuses.
- Bank statements
- Investment statements
- Your latest income tax returns
- Checkbook registers
- Credit card statements
- Loan information (i.e. car & personal loan statements)
The next step is to figure out your spending habits, and can you afford to spend it?
- Take home pay
- Bonuses and or commissions
- Child support
- Home expenses (mortgage/rent, all utilities)
- Food expenses (groceries, cleaning supplies, lunch & snacks, restaurant including fast food)
- Transportation expenses (car loan, insurance, gas), public transportation
- Credit expenses (credit cards, personal & installment loans, student loans, taxes and any other payments not mentioned)
Where do you stand?