If you haven’t been following the news recently, then you’ve been missing out on quite the political battle in Washington, DC over our nation’s debt. I’d go into more detail, but the specifics and grand-standing would probably give you a headache. To make a long story short: we need to cut spending and raise revenues, but neither party can agree on a way to move forward and the President is left shaking his head at party leaders behaving more like spoiled children rather than statesmen. Our national budget may be a mess, but yours doesn’t have to be. Creditnet has an easy, 5-step process to making sure your budget is sound so you don’t end up with a crippling debt like Washington.
Step 1 – Monthly Bills
Rent, Electricity, Water, Cable, etc.: these are the bills that need to be paid every month so you can live your life with minimal interruption. List out each one along with their amounts so you know how much money will come out of your paycheck without exceptions. If these bills are paid off in full and on time every month, the better off your credit rating will be. Take care of this first when making a budget, and you’ll be off to a great start.
Step 2 – Necessities
Food is kind of important. So are clothes, gas, and many other items we deem as necessities. Use your past experiences with shopping for necessities to determine how often you go to the store, how much each trip costs on average, and how much of your paycheck should go towards these things every month.
Step 3 – Savings
You don’t want to end up living your life paycheck to paycheck. Set money aside for your savings account so you can eventually afford more ambitious things, like a vacation getaway or a luxury. Also, you’re going to need to put money aside each month for retirement. It may hurt to put this money aside now, but you’ll be thankful you did 30 or 40 years down the road.
Step 4 – Disposable Income
Everybody needs that occasional night out or that guilty pleasure item. If you’ve set aside for bills, necessities, and savings, then hopefully you have a little bit left to spend however you want. Money isn’t the most important thing in life, but it is needed to enjoy it sometimes. Set aside some money each month you know you’ll be able to spend. You’ll get something you want, and you’ll be doing your part to help the economy.
Step 5 – Credit
Whether you have no interest credit cards or cards with high interest, just having one can be important. Not only does using a credit card for small things and then paying it off every month help improve your credit score, but it can be a lifesaver during emergency situations. If you have a credit card, use it sparingly, and always pay the balance off in full every month. Then, when you need to rely on your credit to make a large purchase like a home or car, you'll be in a position to receive the best rates and terms which will save you thousands. That’s it: follow these 5 steps when creating a budget, be it weekly, monthly, or annually. Don’t forget to keep track of your credit, check your bank account regularly, and spend wisely.
Photo credit: Shutterstock / Stuart Miles
