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3 Simple Steps to Create a Budget

3 simple steps to create a budget

A budget can seem like one of the most difficult things to do. This is often because we are not really sure how to start. Here are 3 steps to help you create your own budget.

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The ins and outs

First, you have to know your income and expenses. The former is simple enough. All you do is record your salary, bonuses, and any other income. If you are an old fashioned kind of gal you can draw it up on paper otherwise a spreadsheet on your computer works too.

Knowing exactly how much you spend can be trickier because of all the little things you buy on a daily basis. The solution: keep every receipt you get. This includes receipts for every coffee and every Bar One you grab in the supermarket line. They all add up. You can enter these amounts onto your spreadsheet every week.

How much are you losing?

3 simple ways to create a budget

Now, you will need to organise your budget into categories such as weekly, monthly, annual expenses as well as savings and investments. Your weekly expenses will likely include groceries and petrol while, monthly will be housing and car payments. Annual expenses may include car maintenance and vacations. The savings and investments that you make also need to be included because they likely take up a good chunk of you income. Once these expenses have been subtracted from your income you will be able to determine your financial standing.

What it all means

Lastly, your budget will balance, be in a deficit or show a surplus. A balance in your budget is good since you have not fallen into debt. It is always good to live within our means. You can improve your finances by analysing your expenses to determine if any of them can be decreased.

If you are at a deficit, your top priority is to pay off your debt as soon as possible to avoid accumulating interest fees. If you have a surplus you are doing quite well. You could benefit from consulting a financial advisor about what to do with your extra cash.

Budgeting is important to gain control of your finances. A budget shows you exactly what you are making, how much you are spending and what it means for your financial future. The above 3 simple steps will help you create a simple budget.

Written by Noma Mtebele

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