Creating a budget doesn't have to be too complicated. Rather, your
budget must be simple, easy to track, and comprehensible.|
You can use the following tips to come up with your own budget:
1. List down all the sources of your income. A lot of people believe that a budget plan is all about expenses. It's not. It's about knowing how much you would have to spend at a given time period. This way, you would end up with some savings or, if it's not possible, zero debt.
Thus, the first thing that should appear on any budget plan is the different income sources. Make sure that you can list as many alternatives as you can. For instance, you could be working full time but you also have freelance jobs on the side. You don't have to have an exact amount, especially if the job is based per project. Nevertheless, make sure that you can also generate a comfortable and "close to accurate" estimate.
2. Write down all your expenses. After you've created your sources of income, you then have to identify the different types of expenses that you need to take care of. Expenses are usually divided into two. You have fixed and variable ones.
Fixed expenses are those that occur every month, and most of them hardly change figures. If they do, the differences would just be minute. A good example is your mortgage. If you have a fixed interest rate for the next few years, the amount you pay back to your lender every month will hardly ever change.
Variable expenses, on the other hand, are those whose values don't remain the same every month. These include the amount you spend on fuel, food, travel, and entertainment.
Coming up with estimates for expenses is very important. You don't want to make it too conservative or too far out from your actual expenses. What you can do is to look at your financial statements, receipts, and other documents that you can use to determine the best possible estimate for each of your expenses. You may also factor in fluctuations in market prices, especially on fuel and food.
Don't forget to include retirement and emergency savings too on your list of expenses. This is to ensure that you can definitely allocate a good amount for the growth of your bank account.
3. Determine if you're going to have a gain or a loss. When you already have both the list of income and expenses, you can then add the numbers up and subtract the sum of your income to that of your expenses.
If you end up with a positive result, then you're lucky. It means you can still have more savings, or you can opt to use the extra funds for something else. If it's negative, you may want to make adjustments on your expenses, or you can look for ways on how you can increase your income.
Make sure that you can review your budget regularly, so you won't have to go overboard with your expenses and to determine if adjustments have to be made on your projects next budget planning cycle.