### Creating a Budget

Welcome to "Creating a Budget." On this page you will find out the best to way to create and efficiently maintain a budget. Enjoy!

#### Step 1: Calculating Income

The first step in creating a budget will be calculating income. This is the first step because income shapes how much money we can use to pay for expenses, save for retirement, or buy wants. Usually income is represented by salary from a job but other items to include in income calculations include cash gifts, profit from selling items in a garage sale/online or even money from a parent or relative. Throughout this page I will be using examples to help with visualization of the concepts; I will be using a fictional character named Jack

Example: Jack's Income

Jack has a job and receives a monthly paycheck of \$1700 from his job. Jack also receives \$200 a month from his parents and he also sells \$100 worth of items online. So, as of right now, Jack's total income for the month is \$2,000.

#### Step 2: Calculate Fixed Expenses

The second step in creating a budget will be calculating fixed expenses. There are two types of expenses, fixed and variable. Fixed expenses are expenses that do not change from month to month; they always stay the same price. For each month, fixed expenses to keep track of include rent, house payments, insurance, car payments and subscription services like Spotify or Netflix.

Example: Jack's Fixed Expenses

Each month, Jack has to pay \$350 for rent, \$10 for Netflix, \$90 for car insurance and \$50 for his cell phone bill. All of these bills stay the same each month so, at the moment, Jack's fixed expenses are \$500 a month.

#### Step 3: Calculate Leftover Funds

The next step is figuring out what money is left over after fixed expenses have been taken out of income. This is simply taking our income and subtracting our fixed expenses from it. Once this is calculated, we have our leftover funds.

Example: Jack's Leftover Funds

With our example that we have been using, Jack has a monthly income of \$2,000 and his fixed expenses per month is \$500. So, after some subtraction, \$2,000-\$500, we can determine that Jack has \$1,500 leftover for the month.

#### Step 4: Set Variable Expense Goals

Now that we know how much money we have leftover, we can calculate amounts for variable expenses. Variable expenses are usually close in monetary value each month, but may increase or decrease due to certain circumstances. Variable expenses can include groceries, utilities, fast food and restaurant bills, necessities, medicine and much more. So, the best way to set these variable expense goals is to think about what exactly happens in each month. We will use Jack to better explain this.

Example: Jack's Variable Expenses

Since this is Jack's first time ever using a budget we will be starting from scratch. Jack's utilities each month are around \$100 each month so we will set that as first variable expense goal. Jack is also setting goals to only spend \$50 on restaurants, \$40 on gas, \$40 on video games, \$130 for groceries and \$100 for other shopping items such as necessities and clothing. Lastly, Jack has set a \$40 "cushion" goal so if he goes over in groceries or gas, he can use this cushion money to maintain his goals. So, as of now, after adding up all the variable expenses (\$100 + \$50 + \$40 + \$40 + \$130 + \$100 + \$40), Jack's variable expenses equal: \$500. From earlier, we know that Jack has \$1,500 in leftover funds. So, by now subtracting the variable expenses from the leftover funds, we can find out how much money we have left over for the month. This is simply \$1,500 - \$500, which equals \$1,000.

#### Step 5: Set Financial Goals & Priorities

Now that we have determined how much money we have left over after calculating income, fixed expenses, variable expenses we can set some long term financial priorities and goals. Financial priorities can consist of setting goals to pay off personal loans, saving for retirement, saving for house or even saving for a child to go to college.

Example: Jack's Financial Goals & Priorities

So, Jack has decided to set to set some financial goals. From Step 4, we have calculated that we have \$1000 in leftover funds so we know what exactly what we use towards these goals. Jack attended college and now must pay off his student loans. For this example, we will say that Jack has to pay \$300 towards his student loans a month. As well, Jack wants to start saving for retirement. He would like to start putting another \$300 towards retirement. Lastly, Jack's final goal is start putting money into his saving account. Since we had \$1000 to start with, but used \$300 for retirement & \$300 for paying his student loan, we have \$400 left over. Jack will put this \$400 towards his saving account. Now, we know where every single dollar of Jack's has gone!

#### Step 6: Stick to your Budget

Stick with your budget. It may be hard the first couple months but in the long run, you will save money and live a happier lifestyle. Plus, there is a many different ways to keep track of your money. Below I will provide 3 different videos on ways to keep track of your budget (Excel, Mint and on paper). Personally, I use Mint; it allows me to hook up my bank accounts and bills so I can track everything from their website or on the app. As well, I will provide some resourceful links that you can explore! So, don't be afraid to do some research of your own to find what's the best way for you to keep a budget. Enjoy the videos and extra resources!

#### Third Way to Keep Track of your Budget: Paper & Pen

Want even more info on how to create a budget? Well, here you are! Click on the buttons to get started.

Thanks for taking the time to read my page. The links for the photos in just a button click away below. Hope you enjoyed the page!