How to Design a Monthly Budget

    • How often do you plan ahead with your expenses? Are you prioritizing your spending?

      How often do you plan ahead with your expenses? Are you prioritizing your spending? If you aren’t sure how your money is being spent from month to month and are looking for a solution to iron out your money woes, then a well-structured, all-inclusive budget is what you need.

      By weighing your income and expenses, a detailed budget will ensure you have sufficient allowances for your top priorities. In addition, it will also help you make healthy and informed financial decisions in the future as well.

      Plan Ahead

      If you need a little extra cash to meet your monthly needs, then yes, there is a better option. It’s called a line of credit, and it comes with several advantages. Let us take a closer look at why a line of credit might be a better option for you.

      Planning is an integral part of budgeting. It allows you to build a structured spending plan for your money. And you need to do it every month because it is the first step in ensuring you make your financial goals a reality.

      Have you ever heard of the 50/30/20 budget rule? This time-tested budgeting solution constitutes dividing your after-tax dollars in the following manner:

      • 50% – Should be allocated towards necessities required for your well-being and safety. These include your mortgage or rent payments, childcare and schooling, travel and living expenses, utilities, minimum debt payments, insurance, and other essentials.
      • 30% – Should be kept for your ‘wants.’ Separating needs from wants isn’t easy and is very subjective. If you have debt and are keen on finding a way out of it fast, deciding on limiting your wants like travel, shopping, and entertainment is a smart way to go. That said, every budget should include a little room for ‘wants’ to give you an outlet from the mundanities of life.
      • 20% – Must be saved to help you manage all those unexpected expenses, clear off your debt as soon as possible, and to also save for a rainy day. By toggling between your debt and savings, you will ensure you’re taking all the necessary steps to secure your financial future.

      Work out your monthly income

      Once you’ve determined how your expenses will be allocated, determining your income is a pretty simple task. Your income may include:

      • Regular income – your salary or wages earned monthly or bi-weekly.
      • Other regular income – including rental income, child support, interest, alimony, and/or dividends.
      • Intermittent or irregular income – such as pay from cash gifts, sale of items online, seasonal or contractual work, and/or bonuses.

      With regards to irregular income, add the total amount you receive for the year and divide by 12 to estimate how much extra income you make a month. For instance, if you receive $2,400 in May for any additional work done, that would equate to an average of $200 per month.

      List your expenses

      Next, you will need to work out exactly how much you are spending every month. Sources you can get this information from include bank statements, your financial files, bills, and receipts.

      While some expenses might characteristically occur once every few months like insurance payments, vaccinations, and holidays, others might be unexpected, like vehicle repairs and appointments to your doctor. So, a good rule of thumb is to add in an extra 10% to 15% to meet any ad hoc expenses that do pop-up so that it doesn’t throw a wrench in your savings plan.

      To facilitate gaining an accurate financial picture, a practical approach would be to calculate your average expenses for a period of six months to a year. By thoroughly factoring in all your expenses, you create a more realistic budget, which will help you make better-informed decisions in the future.

      Create your budget

      Regardless of whether you are using an excel or paper, you will need to create separate sections for your income and expenses each month. Then after you have consistently updated all the fields, at the end of each month, subtract your total expenses from your total income.

      If you have anything left over, you allocate it towards your savings. But if there is a short-fall, you might have to consider:

      • Decreasing your expenses
      • Increasing your income and/or
      • Securing a line of credit

      Consider a line of credit

       For those months when you do go over budget and aren’t sure how you will make up the shortfall, a line of credit could be your lifeline to pull you out of a tough situation. With customized rates and borrowing limits, the greatest advantage this financing option delivers is that it’s completely at your discretion how much you wish to use at a time.

      Plus, unlike personal loans, with a line of credit, you only pay interest on your outstanding balance.

      When you can exercise flexibility and control over your finances, it helps you bolster your budget with a little more room and thereby helps make your financial future a little more secure.



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