Given the current COVID-19 pandemic, many families and individuals have experienced financial hardships. For this reason, the creation of a family or individual budget can help people save money during this difficult time.
A budget could be used as a way to plan and weather the current economic situation. Budgets should be flexible in nature and easy to implement. An easy-to-use budget can be a very useful money-saving tool. Below is a step by step process on creating a budget:
- Make a spreadsheet that can be updated on an ongoing basis.
- If you’re old-fashioned (which is perfectly acceptable) a budget can be done on paper as well.
- Start with two sections, one for Income and one for Expenses.
- Review your income (cash in) and expenses (cash out). Examples of cash in may include: employment wages, pension income or money from a side hustle. Examples of cash out include rent/mortgage payments, insurance (auto, home, life), automobile expenses (fuel, lease or financing payments, repairs and maintenance), and groceries.
- Categorize your expenses. The more detailed you can be in this area, the better you can understand your situation. For instance, you may want to group restaurants with groceries, or you may want to separate those into categories so you can see how much money you’re saving cooking at home.
- Record amounts from your receipts into your spreadsheet or paper budget.
- Subtract expenses from income to see if you made a profit.
- If you want to improve your profit, or turn loss into profit, consider either making more Income or spending less on Expenses.
Once the information has been organized, it can be reviewed and important decisions can be made from the budget. You may be surprised by your spending in one area or another and may identify areas where one could save money by either eliminating unnecessary spending or reducing the amount spent on specific expense areas. The budget can also be used as a tool in discussing financial matters with banks, financial planners and of course accountants.
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