5 Simple Steps to Creating a Budget
Making a budget is a smart strategy to achieve financial wellness and meet your life goals. Here are five simple steps to follow.
Step one. Determine your net monthly income.
This is your take-home pay – the amount of money after taxes, insurance premiums, and any other payroll deductions.
If you have additional sources of income, like alimony or rental and investment income, include those too.
Step two. List out your monthly expenses.
Start with your fixed expenses, like rent, car payment, and student loan payments.
Then add variable expenses, like coffee, takeout, and subscriptions. Be honest with yourself.
And don’t forget to average out expenses you might only pay once or twice a year, like car insurance or vacations.
Step three. Choose a budgeting plan.
There are many different ways to budget. For simplicity and ease, consider the sixty-twenty-twenty rule.
That’s sixty percent of your income for housing, transportation, groceries, healthcare, and other living expenses.