Flexible expenses from month to month12/8/2023 Some items can fall into both categories like you need shoes to protect your feet and keep you warm in the winter but you may want a pair of $150 shoes that look better than the $15 pair that would cover you need or three pairs you already have. Wants are things that you enjoy but would not jeopardize your health or safety to go without like Netflix and Starbucks. Needs are things that are essential for you to live, work, and go to school like housing and food. Your rent may go up each year or you may pay a loan off and have more funds leftover each month to put into savings or towards paying off debt.ĭetermine if your expenses are needs or wants. Make adjustments to your budget as needed. Once the envelope is empty, no more coffee purchases for that month. For instance, put cash in an envelope for coffee and use that cash to make your coffee purchases. The envelope method involves putting cash into an envelope for expenses. An app can track your expenses and notify you when you are getting close to your budget for an expense. A couple common ones are apps or the envelope method. Regularly review your spending to ensure you are staying on budget. Put this amount in savings or use it to pay off debt. If your total expenses are lower than your income, subtract your total expenses from your total income. Are your total expenses higher than your total income? If so, you will need to reduce your expenses or increase your income. Now review your total income and total expenses. For flexible expenses, you can use an average amount or use the highest amount. Flexible expenses are ones that can change from month to month like your food expenses or your electric bill. Fixed expenses are ones that are the same each month like your rent or car payment. There are two types of expenses: fixed and flexible. Gross income is the amount you receive prior to any deductions being taken out. Net income is the amount you receive after taxes and any other deductions are taken out. When determining your income, be sure to use your net income. Keep in mind that money that has to be paid back is typically not considered income so while you may be using a refund from a loan to help cover expenses, it should be your last resort. For many students this will also include your financial aid refund check. This includes wages, self-employment, child support, interest, Social Security Benefits, housing assistance, or food assistance. Now that you know how you spend your money, it's time to create a budget.įirst, determine your income. While you are tracking your expenses, it can be helpful to start thinking about the areas you can cut back to free up some money if you need to. If you use cash or a combination of cash and card, you can use a paper diary, an app, or a program like excel to track it over the next week or month. Make sure you do your research on these offers before accepting any. Be aware that some apps also market credit cards and loans. There are also apps that do this for you or you could review your bank account transactions to determine this. If you have a bank account and use your debit card for purchases, your bank account may have a tool to do this for you. Keep a spending diary to track what you spend your money on and how much you typically spend. It can also help you work towards your financial goals like saving for a new laptop or paying off your student loans.ĭo you know where your money goes? How much have you spent today? This week? The first step to budgeting is knowing where your money goes. Budgeting focuses on two things: your income or how much money you have coming in and your expenses or how much you are spending.Ī budget can help you determine if you can afford a new or increased expense before you buy something new or decide to move into a nicer apartment. The best way to ensure you are making good financial decisions is to create and follow through with a budget or personal spending plan.
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