Whether you’re struggling with personal debt or simply trying to gain a handle on your finances, creating a budget will help you maintain control over your spending. Tracking how much you spend each month and evaluating your choices can provide a foundation to make more effective financial decisions moving forward.

In this post, we’ll explore the processes of creating a monthly budget to track your income and expenditures, and achieve your financial goals.

Gather Your Paperwork

The first step in the process is to gather your paperwork. Ensure that you have access to all available information about your income and expenses. Access information such as the following:

• Credit card bills
• Utility bills
• Mortgage statements
• Investment accounts
• Bank statements
• Receipts from the most recent three months

Calculate Your Income

Document your monthly earnings after taxes. You may also have outside sources of income, such as from self-employment and child support. Include these sources in your income calculation. If you are self-employed, then you’ll likely benefit from using your lowest earning level in the last 12 months as your income. Including the smallest monthly amount will help you form a more effective savings plan when creating your budget.

Document Your Monthly Expenses

Next, it’s time to analyze your monthly expenses and write them down in a list. Your monthly costs should include the following items:

• Insurance
• Groceries
• Childcare costs
• Mortgage/rent payments
• Eating out costs
• Travel
• Student loans
• Utilities
• Entertainment
• Car payments

You can use your bank statements from the previous three months to document all areas of spending.

Determine Which Are Your Fixed and Variable Expenses

Next, separate your expenses into fixed and variable costs. For example, fixed costs are those that you pay the same amount for over some time. On the other hand, variable expenses include items that can rise and fall depending on your preferences and the marketplace. 

Examples of fixed expenses include:

• Car payments
• Internet services
• Rent payments
• Mortgage payments (if on a fixed-term)
• Childcare

Examples of variable expenses include:

• Gasoline
• Eating out
• Entertainment
• Vacation spending

When reviewing your total costs, you can begin to organize your budget. Start by assigning a value to your fixed expenses, and then a predicted value based on your last three months of variable expenditures.

Compare Your Income and Your Expenses

Now, take away your expenses from your total income. The goal is to ensure that your incoming money is enough that it’s higher than your total expenses. You will then be able to put additional money into your budget, so you can save for retirement or pay down your personal debt.

Begin Making Expense Adjustments

If you find that your income doesn’t cover each of the expenses in your budget, take the time to analyze your spending and make a few adjustments. Consider, for example, spending less on restaurant food for the month, and then comparing your budget after 30 days to see how much money is left. You might be surprised at how much money you can save with just a few adjustments to your spending.

Budgeting Tips to Manage Your Personal Debt

Now that you know a little more about creating a budget, let’s explore the process of managing your money while paying off personal debt.

Many people find themselves worrying about their debt issues, and it often affects their day-to-day lives and their health. The following tips can help you become more effective at managing your debt.

Pay Off the Highest Interest Rate First

One of the most common mistakes that people make when dealing with debt is to pay off the bill that arrives first. However, this could leave you paying more money on your debt over time. Make sure you review your current debt levels and establish which creditors have the highest interest rates. Then, work to pay off those high-interest rate debts first before addressing your other debt payments.

Address Over-Spending 

When you analyze your budget, you may find that you’re spending far more money than you first thought on items like entertainment. For example, many of us now have multiple subscription services that we pay for each month. 

We don’t always know exactly how much we’re paying for each service, and this could be costing you hundreds of dollars per month in additional fees. Look for those small areas of the budget that you can cut back on. For example, you might find that you can pause subscriptions to streaming services or monthly gym payments until you have control over your debt.

Consider a Debt Consolidation Loan

The money concern is not always the element that impacts your health the most when you’re paying off debt. The constant worry about receiving phone calls from creditors at home and work can significantly impact your health. You might also worry about losing track of which payments you owe to specific companies. Therefore, this might mean you’re not able to concentrate on activities you would otherwise enjoy.

One option to remove this stress is to take out a debt consolidation loan from a leading local lender. A debt consolidation loan provides you with several advantages. First, it combines all of your debts into one payment with one interest rate. This way, you know exactly how much you are spending each month, and you only have to track this one loan. It also allows you to create a plan to pay off the loan over a specific period.

The loan company will also help analyze your budget and your current financial position. Then, it will guide you on how to streamline your payment process. This way, you not only save money on high-interest payments, but also save time having to handle all of the documentation involved in working with multiple creditors. 

Speak With Qualified Personal Debt Experts Today

Are you ready to speak with a professional about your personal budget requirements? At Charles Advisory Services, our team has helped clients across the region address their issues and craft budgets that help them build a robust financial future. Call us today to speak with a qualified specialist.