This is pretty sound advice from Motley Fool on how to go about setting up a Budget. I have been doing this for about a year now and it is a very interesting thing to do. What I tried to do is to make my budget similar to an Income Statement from a company.
1. The first thing I do is figure out my Revenue (I just total up my 2 paychecks for the month) and put it on the Revenue Line.
2. Next I figure out my Fixed Expenses for the month. Here I put how much I pay for housing and also various monthly subscriptions like Netflix, the phone bill etc. These things are pretty much fixed in stone so the number doesn't really change too much from month to month. I put this stuff in the Cost of Revenue line.
3. I then put the Variable Expenses next. Here I put the cost of fuel, eating out, clothing and entertainment. You can break this out futher if you wanted to by listing the places you eat out at, where you purchase clothing from, and how much you spend on each entertainment item. You can make this easier by linking excel sheets together.
4. I then put in a line for Non Recurring Expenses. This is where I put how much cash I spent on various things in everyday life. Here I would put the magazines I bought from Barnes & Noble, or the Açai Supercharger I bought from Jamba Juice. This is usually the stuff I bought with cold, hard cash so I can track it pretty easily by just checking out how much I take out from the cash machine and then breaking it down. Putting down the entire amount you took out for the month is more important to me then figuring out what I bought.
5. Finally, I put down my Net Income by minusing the Fixed, Variable, and Non Recurring Expenses from the amount I have for Revenue. My goal is to have this number be positive each month no matter what. If it is negative I go into cost cutting mode to see what fat I can trim mostly from non-recurring expenses.
No comments:
Post a Comment