Your fixed expenses would include things such as your mortgage, car payments, student loans, and so forth. These expenses remain relatively constant month after month. Variable expenses, on the other hand, are those that either only pop up every few months, or fluctuate in cost month to month. These may include property tax payments, entertainment, groceries, and so on. It's a good idea to put some money aside every month - no matter how little - towards your savings account.
Financial experts typically recommend setting about 10 percent of your post-tax income aside for your savings, although the more you can put away the better. You might opt to have a portion of your money transferred out of your checking account and into your savings account automatically each month so you don't have the excuse of 'forgetting' to put that portion aside. Retaining all your receipts for all your expenditures will help you determine how much you're actually spending every month.
How to manage your money
After two or three months of adding these totals up, you'll have a good idea of the average amount of money that is going towards expenses, and determine whether you need to cut back on spending or not. By writing down your expenses in a notebook, you will have to focus solely on that. There is something about writing down numbers that solidifies it in your brain which is why I recommend pen and paper, at least to start.
In my opinion, if you use computer spreadsheets or budgeting apps, it is way too easy to get distracted.
YouTube, Google and other blogs like this one lurk out there to take your time and prevent you from action. The best way to start is to eliminate distractions, block out some time and just get started. Depending on how many statements and transactions you have, this may seem like a daunting step. Some of the categories you might create include food, transportation, clothing, housing, entertainment, gym memberships, travel, and so on. On the other hand, expenses like transportation, food, and entertainment are more likely to be different each month.
I recommend you start by looking at what you spent money on last month.
Print out a physical copy of last months bank and credit card statements. All of them.
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- Step 2: Track your spending?
- Personal Income and Expenses?
These are going to have some great information on them that we will use to track your personal expenses as well as help to establish a budget. Having your bank and credit card statements in hand will allow you to see the entirety of where you spend money. If you have different colored highlighters, it might help to designate one highlighter color for each large category of spending. Here are the top five I would use for this initial phase:.
You could even use a different symbol next to each one. Repeat until you have gone through your five colors. You should still have some line items that are not highlighted.
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Once you are done going through your statement, total all of the items on a sheet of paper. We just want a high level overview of what we spent money on last month. Get those totals and write them down. Next, write your total income for the previous month, your total spending and the difference.
Everybody starts somewhere and the fact that you are going through this process means you are ready to start effecting a change in your life.
Finance ]. Don't bank on uncertain income like raises, bonuses or a particularly fruitful trip to Las Vegas. Tracking your income is the easy part of creating a budget. It's much harder to pinpoint your spending.
This is why personal finance software is so helpful. Programs like Quicken or Microsoft Money can access your online banking records and download all recent transactions for detailed analysis. With a complete list of all of your bank deposits, outgoing checks and transfers in front of you, you can begin the important task of categorizing all of your income and expenses.
In addition to specific categories like rent or groceries, personal finance experts recommend that you organize all of your expenses under two broad labels:.
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