You might be surprised at how much you spend eating out. It’s up to you how much in the weeds you want to get.Īfter you compile expenses into one spot, total each category to see where the bulk of your money goes. Or, you can get more detailed and add categories such as entertainment, food costs, travel and transportation. For example, you might label purchases as needs, wants or savings/debt. It helps to categorize as you parse your spending. Either open a spreadsheet or get out old fashioned paper and pen – it’s time to total your expenses. Pull out your credit card statements, housing and utility bills, bank statements including ATM withdrawals and any electronic payment records, such as Venmo or PayPal. If it seems overwhelming, limit yourself to one month’s worth of expenses. In order to get the full picture of your spending habits, you’ll need to do some financial forensics on yourself. Time to play detective with your own finances. Whatever extra income you earn, add it into your monthly take-home pay. Maybe you babysit sporadically or have a blog that earns ad revenue, or you teach a weekly fitness class. Once you have a number, add in any extra side gig money. Freelancers may have to estimate their monthly income. This will be easier if you’re a salaried employee with a regular paycheck. Tip #2: Determine Your Monthly PayĪs the saying goes, “what gets measured, gets managed.” How can you manage your money without knowing what you earn each month? If you don’t have a concrete number, determine your monthly income after taxes. Whatever concerns you most, make that your priority, at least to start. Or, perhaps you want to establish an emergency fund so you’re not “up a creek without a paddle” when your car needs an engine overhaul or your pet needs surgery. Maybe it’s a wedding or a vacation you want to save for. Then you can cut back on other categories to “save at maximum capacity” for your true priorities. “The largest categories should reflect what matters most to you,” whether you value international travel or taking care of your body. Patrice Washington, a leading authority in personal finance, entrepreneurship and more, advises that money priorities align with your personal values. Do you have credit card debt that makes your stomach churn just thinking about it? Paying that down might be your No. That focus is what’s most important in your life, right now. You need a focus to align your money goals with your money habits. If you skip this crucial step, you won’t buy into your financial plan. Before budgeting, you need to determine your priorities.
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