5 Tips for Setting up a Budget

5 Tips for Setting up a Budget

Restoring your credit is NOT just about removing inaccurate negative information from your credit report. Your credit is something that will impact your finances for the rest of your life. Having a long-term plan will help you maximize your credit scores for the future.

Make no mistake, you will need your credit in the future!

An important and often neglected piece is a monthly budget. Having a monthly budget will help you to understand where your money is going. Once you know where your money is being spent, you can know take control of your spending habits.

Here are 5 tips to help you with setting up a budget:

1. Be Realistic About Your Budget

If you’ve never made a budget before, you need to start by forecasting how much money you’ll have coming in every month and how much you think you’ll be spending. The more realistic you are about each of these numbers, the more likely you’ll be to stick to your budget.

Make a list of ALL monthly income. W2, 1009, any side gigs that your paid cash, any income you receive from child support, and government assistances.

2. Differentiate Between “Needs” And “Wants” In Your Budget

Particularly if money’s tight, differentiating between “needs” and “wants” can help you stay within budget. Needs come first, and if there’s money left over, you can spend on wants.

3. Align Your Budget with Your Goals and Values

Once you’ve completed your budget, study it and see if you’re spending your money in alignment with your values and goals (short-term and long-term).

Do this exercise again after you’ve attempted to live within your budget for a few months. If you are having difficulty adhering to your budget, you may be overspending on things that aren’t really aligned with your goals.

4. Review and Recalculate Your Budget

A review of your budget every month can help you stay on track with your finances. In essence, a budget is a forecast of what will happen; take the time to go back and recount what actually did happen. Where did you overspend? Where did you save? What can you do differently next month?

While it’s important to review your budget every month, you’ll also probably need to re-calculate your budget every 3-6 months, or whenever something changes dramatically in your financial life.

5. Include Savings as an “Expense” In Your Budget

Decide on an amount you’d like to save each month and include it as an “expense” in your budget. Set up a separate savings account and transfer or deposit money into it every month.

Your savings can be used for short-term goals (such as a vacation or large-ticket item) or long-term goals (such as college tuition or a house). This money can also be used in case of an emergency, such as a car repair or medical expense.

In closing, setting up a budget doesn’t have to be hard or a daunting task. Again, be sure that your budget is in line with your short and long-term goals. As you start to achieve your goals you will have a feeling of control over your finances.

That’s a GREAT feeling to have!

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