Some of your expenses may only come once or twice a year. These might include things such as vacations, property taxes, home or auto insurance, and back-to-school supplies. I'd also put things such as Christmas spending in this category. If you take the total of these annual expenses and divide by 12, you'll know how much money you need to set aside each month to cover them.
Be sure to set aside a certain sum for emergencies and unexpected expenses. Of course, no one can anticipate an emergency, but you might set aside two or three thousand dollars each year to cover them. Consider prior years' experience to help make an estimate. Convert the total to a monthly amount, as in the previous example.
Once you've added up all your expenses and converted them to monthly expenses, you'll have an idea of your monthly expenses.
Now, figure up how much money you (and your spouse or partner) earn each month, after taxes and other deductions. Compare this number to your expenses.
If your expenses are greater than your income, you'll need to either cut back on expenses or look for new sources of income.
If your income is greater than expenses, you'll know how much you can put into savings. (Yeah!)
Remember, none of this will do any good unless you're honest about your income and expenses.
But if you are honest and stick to it, a budget can be the first step to taking control of your life.
Source: Evansville Courier & Press. Powered by Yellowbrix.
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