In this hardest of times, making both ends meet is a struggle in itself. This is why it is a must to analyze your budget so you can maximize your spending power, ensure that there is enough budget to spend for needs and wants, and guarantee that money is set aside for important expenses, as well as for emergencies and similar unexpected expenses.
Examining your budget may be challenging, but here are a few effective ways you can practice to effectively analyze your budget:
Compute your monthly income
To analyze and create your monthly budget, you must first compute your regular monthly income. This would include all the funds that are coming in regularly by the end of the month. In case of unfixed or commission-based monthly income, you can compute for the average and include that to make your computation more comprehensive. It is also a must to subtract items like income tax and payables, as well as loans or social security contributions, in order to compute your net income, or the actual funds you receive at the end of the month.
List down your monthly expenses
In the same manner, you must also list down all your monthly expense to help you set your monthly budget and analyze whether it is enough to cover all your expenses for the month. Your list must include all your fixed expenses, or those that you need to regularly pay each month. This may include rent, car mortgage, school tuition, insurance premiums, and the likes. Variable expenses, on the other hand, are those that may vary from one month to the next and must also be included in your list. Such expenses include gas, groceries, funds for dining out or food takeaway, medical expenses, as well as car maintenance and repair fees.
Create a budget plan
Once you have listed down your monthly income and expenses, you can now create a personal budget plan taking all these information into consideration. With these data you can now set a monthly budget plan that effectively fits your earning, spending, and saving profile.
Some would recommend the 70-20-10 budget technique, where you will need to set aside 70% of your income for expenses, 20% for wants, and 10% for savings. Some others will also recommend setting aside a part of your income for emergencies, as well. While this may be applicable for some people, some others may struggle with this budgeting style. Click here to learn more about budgeting and make your budget plan work for you.
You can also explore different techniques you can utilize to monitor your budget plan to see which one works perfectly for you. You can opt for the old-school pen and notebook, use a spreadsheet software, or settle for an online App which you can conveniently access using your mobile phone.
Adjust your budget accordingly
Once you have created your budget plan, you can easily analyze your monthly budgeting. You can see if you are spending more on some expenses compared to the other. You can also effortlessly determine the part of your budgeting plan that needs adjusting. Your monthly plan can tell you if you are spending even more on food takeaway and you can simply adjust that the next month in order to put the funds in other necessary expenses or for your savings.