The best way to save money is to form a budget. If your new year’s resolution is to sock away some cash, constructing a budget for the year is a good place to start.
A budget helps you visualize the money that’s coming in and out of your everyday life and plan ahead to reduce the chances of financial trouble. Below are five tips for budgeting for the new year that will keep you on track with your finances.
List your income and expenses
On a piece of paper or the computer, make two columns. On the left side, write down all of your expenses for the year. This includes your rent or mortgage, all of your bills, child care, car payments, student loans, and money for things like gas and groceries.
On the right side, list all of your estimated income for the year from any jobs, assistance, or other ways of receiving money.
Add up the total for both columns. If the number on the right side is larger than the one on the left, congratulations — you’re living within your means. If the number on the left is bigger, you’ve got some work to do.
You won’t be able to list out all of your incomes and expenses right down to the last dollar. Some of your expenses, like electricity bills or gas, will fluctuate from one month to the next. And the same can be true for your income.
When writing down your expenses, overestimate the amount. Use a number that represents the most you can expect to spend. And when writing down your income, underestimate the amount with a number that represents the least you could expect. Doing [...]