How to Create a Budget
1. Create a spending document in which you write down all of your expenses. This is the getting to know what you owe documents.
2. Create a second document and this time list down your income. Jot down all the income generating jobs or projects that you have, including any income you receive from self employment, interest or dividends from a share in a business, alimony or child support that you receive, pension or retirement income, and also public assistance.
3. List down the total amount you receive each pay period. Divide them into the fixed income and the ones that are If the amounts vary from period to period, get the average amount. Indicate the period covered by the payment, next to each amount, such as if it is weekly, twice monthly (24 times a year), every other week (26 times a year), monthly, four times a year, or yearly.
4. To get your total average monthly income, which will determine the maximum amount that you are to spend every month, multiply or divide the pay period into the net amount (total amount after the subtraction of all the legal deductions). For example, if you are paid twice a month, multiply the net amount by two. If you are paid every other week, multiply the amount by 26 (for the annual amount) and divide by 12.
5. Now it is time to compare your monthly expenses and your income. Check the “spending document” or the monthly expenses that you have previously prepared and compare it to your monthly income. If your expenses are more than your income, it is time to cut down on your spending until at least the figures even out, but if on the other hand, the income is more than the expenses, then it is time to put the excess into a savings account.
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