You don’t need to be a numbers expert to build a budget that fits your day-to-day life and financial reality. Building a budget is essential for your home or your personal finances if you want to use your money wisely and keep accounts clear.

If you have never done one or want to improve the one you already have. In this post, we explain step by step how to calculate the ideal budget and have good financial health. Keep reading!

What is a budget, and why is it important?

A budget is a system for planning income and expenses in a given period. It is the amount you need to cover personal or family expenses, reach a goal, or properly use your economic resources.

Having a structured plan to use money wisely will help you:

• Keep track of your money.
• Follow up on expenses and identify those that are unnecessary.
• To project how much you can saved.
• Create plans for unforeseen events.

How to build a budget like an expert

Step One: Check Your Income

Income (how much you earn) defines your consuming power. Your spending must adapt to this reality. Include your net salary, income from financial investments, rent, etc.

Only “list” what you receive: a bonus estimate or the possibility of receiving commission should not be considered. After all, relying on uncertain money and ahead of time can be a problem! Your overdraft and credit card limits are not part of your monthly income setting.

Remember: credit must be used responsibly.

Second step: analyze your expenses

First, list the fixed expenses (those that don’t usually vary, such as rent, domestic servant’s salary, social and labor charges, etc.).

Also, regarding expenses, think carefully about semi-variable expenses (food, electricity, water, telephone, etc.) and variable expenses (clothes, shoes, gifts, travel, cinema, bank fees, etc.).

Try to analyze the invisible expenses very carefully: they are small day-to-day expenses that take the family’s money without anyone noticing: your child’s school lunch, coffee before work, the magazines you buy and don’t read much are some examples.

Step Three: Calculate the Difference

It could be said that this is the moment of truth! Compare how much you get with what you spend. What is your situation?

Step Four: Decision time

If you are spending less or in line with what you earn, it is worth reflecting on your spending quality.

If you have a balanced budget but are not saving, try to cut expenses to invest at least 10% of what you receive. Aim to build an emergency reserve equal to at least six months of your current expenses.

If you’re spending more than you make, there’s no alternative but to cut back on spending. Talk to your family. Everyone should be involved in this effort. Even if you are financially responsible for the family, you are not the only one to spend it, so everyone should be involved in this goal.

In conclusion

Budgets provide the roadmap of what your financial future will look like; where you are, and where you are going. Everyone should be committed to getting their budgets right. To automate this process, you can take advantage of personal software like Monespire. Millions of people worldwide use Moneyspire’s software to manage their finances – join them now and get your personal finances in order.