Have you ever gotten to the end of the month and wondered, “Wait… Where’d all my money go?” Do you feel anxious just thinking about money? Are your finances spinning out of control and you don’t know how to make it stop? If so, you’re not alone. Budgeting your finances can be extremely stressful, and it might feel easier to avoid looking at your bank account or accounting for your bills. Sadly, that only continues the cycle. So, today, our experienced Lincoln bankruptcy lawyer is going to help you sit down and review your finances—step by step—so that you can take your life back into your own hands!
4 Steps to Take in Order to Properly Budget Your Finances
1) Take Account of Your Income and Set Monthly Expenses
A) Gather your pay stubs, bank statements, a pen, a notebook, and a drink you enjoy!
B) Write out your income for the last six months.
i. This is easier if your paycheck is relatively the same each time; it can be calculated quickly.
ii. If your paycheck is different each time, take an average of what your income has been over the past six months. (Add each paystub amount and then divide by the number of paystubs.)
C) Write out each of your monthly expenses that don’t change.
i. For example: rent/mortgage, car payments, insurance, phone bills, childcare, a gym membership, and other loan payments.
2) Next, Take Account of Your Variable Monthly Expenses
A) Create an average for the last six monthly of the following expenses: groceries, clothing, personal care, gas, entertainment, utilities, donations, and gifts.
B) With that average, consider how much is reasonable and if there are ways to cut down on these expenses.
i. For example, are you purchasing more clothing than what you need? Could you cut down on entertainment, or eat at home more often?
C) Remember to account for car repairs:
i. Take the cost for the number of oil changes you need per year plus an additional $50 per month for additional vehicle repairs.
3) Now, Add Your Monthly Expenses and Compare That Number to Your Monthly Income
4) Your budget is coming together! Our Lincoln Bankruptcy Lawyer Says it’s Time to Review What You Have
A) If your income is more than your monthly expenses:
i. Great work! Remember to add an additional monthly budget category for savings: emergencies, vacations, or larger purchases.
ii. Keep track of future spending and revisit often to make sure you’re sticking to your budget!
B) If your income is lower than your required expenses:
i. It’s time to take a hard look at where your money is going.
ii. Where can you reduce spending on clothing, entertainment, or personal care?
iii. Are your monthly payments toward debt taking a significant portion of your monthly income?
[Related: Free Budget Planner Worksheet]