Don’t feel bad about not having a budget. Many Americans get by without one.
However, consider that the average credit card debt among Americans in 2015 was $15,355. For those with housing mortgages, you can add another $165,892. And for those who had student loans, put a $47,712 cherry on top.
Altogether that’s $228,959 in debt. A budget is a tool specifically designed to get rid of debt. Let’s figure out how to make one.
What you’ll need
- A piece of paper
- A pencil
- Knowledge of how much you make
- Knowledge of how much you spend
- Knowledge of how much you owe
That’s it. A computer program like Excel is helpful for organization, but it’s not necessary. What we’re trying to do is get all of our money activity, whether it’s coming or going, for one month on one sheet of paper.
How to make a budget on one sheet of paper
- Start by adding up how much you make from all your income sources
- If your income varies, average how much you made over the past 3 months
- Subtract how much goes to taxes, retirement, or other pre-tax sources
- Subtract your monthly expenses: housing, utilities, gas, food, etc.
- If your expenses vary, average how much they were over the past 3 months
- If you have any money left over, allocate it to paying off your debt
- Pay off your debt with the highest interest rate first
- For your other debts, only pay the minimum; extra money should go to the debt with the highest interest rate
Those are the basics. However, make sure to carve out a little bit for fun. If budgeting makes your life miserable, it’s not worth it. The goal is to have disciple with how you use your money. If you can do that without taking the joy out of life, you’ll be in good shape.
Pro-tip: Look for aberrations
An aberration is anything that stands out. So if you calculate the percentages of your above expenses and realize that one of your expenses stands out, you should try to reduce it. For example, if you’re spending 40 percent of your money on gas every month, that is way too much. Try combining trips, taking walks, or finding activities closer to home.
Don’t get discouraged
We know that this stuff can be depressing. However, it might show you at least one or two things in your lifestyle that you can change. Don’t go overboard and you’ll probably be all right.
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