Developing and following a monthly budget can seem like a daunting task. Being able to track expenses and know where your money is going is an important step toward stress-free and debt-free living. Learning how to budget effectively sets the stage for successful financial planning for your future. Here are some quick tips for tracking monthly expenses as part of a comprehensive money management plan.
Write It Down
Whether you make a written list with pen and paper or use a computer program to record your expenses, having a visible record of your monthly bills and expenditures is a crucial part of staying on top of your financial situation. Check your recent bank statements and receipts to gather information about current expenses. Then, develop a simple ledger of the following important categories to have a clear picture of your cash flow.
After-Tax Income
You can easily get this information from your paycheck if you receive one. If you are self-employed or otherwise, you will need to determine a monthly estimate. You can either review your annual income tax report or look at your personal monthly income records. Either of these will help you figure out your average income per month based upon the total year's wages.
List Your Regular Monthly Expenses
Write down all of the bills you pay every month including mortgage or rent, car payment, utilities, insurance, etc. Additionally, calculate an estimate of the amount you spend monthly on groceries and fuel. Add in regular monthly payment amounts for other bills including credit cards.
Include Additional Expenses
Be sure to record any other expenses that can vary from month to month. These may include things like clothing purchases, haircuts, restaurant dining, and other recreational activities. This category is just as important as the others and provides a wealth of information to help you reduce expenditures in your budget.
Know the Difference between Your Income and Your Expenses
Subtract your total monthly expenses from your after-tax income. The remaining amount can be used to pay additional debt or contribute to your savings. Simple tools can help you organize your money management plan and you can even order the latest personal checks for a fresh start with tracking your expenses. Changing your financial picture requires a focus on decreasing debt and/or increasing income, and starts with effectively tracking expenses to take control of your financial future.
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