Learning how to manage your money can be a difficult skill to learn, especially if you've never paid much attention before to where it goes. Budgeting your salary, however, is essential if you want to stay out of debt, pay off your credit cards or start saving. Instead of going on intuition alone, learn to budget and figure out your expenses and the financial benefits will soon be more than obvious.
Step 1
Put your earnings in writing and make it specific. If you get paid every week, your budget should reflect that. List all sources of income, including salary, overtime, jobs on the side (such as babysitting or tutoring) and even income from hobbies and other activities, such as eBay. When the numbers are variable, estimate on the lower side of the scale.
Step 2
Make a list of your fixed monthly expenses, including rent or mortgage, groceries, utilities, credit card payments, gas and insurance, cell phone and other expenses. Then estimate your monthly expenses in each category and how much you should be saving from each paycheck in order to pay for it. For example, if your monthly electricity bill is $100, you should be putting aside $25 from every paycheck in order to be able to pay in time when the bill comes.
Step 3
Keep an expense diary for a month. During this time, write down everything you spend, even if it's just a few cents on a pack of gum. You can keep a daily record or organize it by categories, such as transportation, entertainment, clothing and so on. At the end of the month, look at your expenses in each group and see where you can cut down, such as bringing lunch to work instead of eating out every day, or renting a DVD instead of going to the movies.
Step 4
Subtract your expenses from your income. If the numbers are negative, you need to go over the expense diary and figure out additional things you can cut off. Do not rely on credit cards to cover your basic budget. They should be used as an emergency resource only.
Step 5
Cut down your expenses even further so you can put at least 10 percent of your paycheck aside for savings. You can automate this process with your bank so the amount is deducted as soon as your payment comes in. If you never see the money, you're less likely to miss it.
Tips and Warnings
- Easy ways to cut down on expenses include canceling memberships and subscriptions, reducing your utilities to just the basics (cancel premium TV channels and switch to a cheaper cell phone contract), bringing your lunch to work, stopping smoking and buying only what's on sale. Couponing and learning to cook from scratch, rather than ordering in frequently, are also good options.
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