Whether you are saving for that first home, or just trying manage your current one, it’s always a great idea to put together a budget.  It can not only help you save, but it can show you exactly where your hard earned money is going!  Creating and sticking to a budget may seem intimidating at first, but a good budget will help to pay off debt, fund retirement plans, protect your credit, and help save for large purchases down the line like cars and homes.  Creating a budget that’s easy to understand and simple to stick to isn’t as hard as you might think. Here are 6 quick steps to get you started on building your first budget.

1. Gather All Your Financial Documents.
Bank statements, pay stubs, retirement accounts, utility bills, credit card bills, etc.  These will all be necessary to track your money coming in and going out.

2. Record Your Total Income As A Monthly Amount.

If you are a salaried employee, this is easy. If your hours vary or you work on a commission basis, do your best to average out your income based on the last 6-12 months.  Always err on the low side when estimating.

3. List All Of Your Expected Expenses You Plan To Have In A Month.
Most of us will have a general idea of what our monthly expenses will be, but sometimes unexpected expenses will pop up, especially if you own a car or a home.

4. Break Expenses Into Two Categories; Fixed And Variable.
Fixed expenses will be those that are consistent month to month.  This could be a mortgage payment, student loan, any utility that is on budget billing, etc.  Variable will be those lifestyle expenses that change from month to month.  Credit cards, grocery and food expenses, entertainment or travel expenses, etc.

5. Total It Up.
Add up your monthly income and monthly expenses. If your income exceeds expenses, put excess money towards other things like saving, paying down debt, and/or starting an emergency fund.  If your expenses are higher than your income, adjust your variable expenses first to cut it down.

6. Revise.
Go over your budget on a regular basis to make sure you are staying on track. After three months, review your expenses for each month.  Pick the month where you did the best staying within your budget and try to emulate the same spending for another three months.  If you are trying to save for a large purchase, put most of the excess income into savings.  If you are trying to improve your credit, put it towards paying down your debts first.

Thinking of buying or selling a home?  Email me today and let’s get started!
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