How to Create a Realistic Budget

The first tool for creating a budget is to understand how much money you actually earn for each pay period. While you may earn a salary of $48,000 a year, you certainly don’t take home that much money after taxes, health insurance, and investments. Instead of calculating how much you want to spend each month, refer to the number on your actual paycheck, not your yearly salary divided by 12.

Second, you’ll need to know how much you’re regularly spending. Gather all of your bills from the last few months and calculate them to see the average amount you’re paying. At first, you should create a budget slightly less than this amount, but you can lower it over time as you get a better idea of where you can cut down.

How to Adjust Your Life to Fit Your Budget

Once you’ve determined average spending habits, look at exactly where you’re spending money. Are there any places you could trim down excess expenditures to pocket more cash? You’ll likely find a number of opportunities, such as the following:

• Zoning your home: This project involves reworking the HVAC system ductwork in your home so that you can control the temperature in each room separately. While the initial service and installation will require some investment, you’ll save big on energy costs in the long run.
• Eating out less often: While you can be tempted to skip home meal prep, eating out is a big money waster. Instead, prepare your meals in your own kitchen.
• Starting a garden: Along that same line of thought, growing your own produce can greatly reduce your grocery bill.
• Bargain hunting: Instead of investing in high-priced items, consider thrift store shopping to look for gently used items at an incredible discount. You can also visit discount websites to save more on essential purchases.

How to Stick With Your Budget Over the Long Term

Once you’ve hammered out the details of your budget and found ways to reduce your spending, you’ll have to find a way to stick with your plan. Try to get support from your family and friends, since being surrounded by people who overspend may cause you to give in to the temptation.

Additionally, keep in mind that your budget isn’t set in stone for the rest of eternity. You can offer yourself some flexibility, especially if your plans change in life or your income becomes altered.

At the end of the day, creating a household budget will help you get closer to your financial goals faster than before. When you’re feeling down about saving money, remember to keep your household budget goal in mind.