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Creating a Budget Right For You

budget

 

Creating a Budget Right for you

Everyone needs to sit down and either create a spread sheet or write up a budget. This  will this help let you see exactly how much money you have coming in, how much you owe and when, how much assets and debt you have, most importantly how much money you have left to spend on things you need and to save to help you not go into any debt.

If you ask any person who is debt free or is really actually trying to become debt free I can almost guarantee they have a budget.

Calculating your Income

First thing you need to do is calculate your household total income for the month. If your household income is salary this makes it a lot easier just make sure you write down how much you get from your paycheck. So make sure you don't just go ok I make $120,000 a year so that is $10,000 a month. Because that is not true, they always take money out of your pay check for EI, vacation, pension etc..

If it varies from month to month go over your last 6 months and take your 3 lowest months total.

You also want to include any money you might get from the government or family etc.  Make sure you right down from where the money is coming from. Example: Husband: $5,000 Wife, $2,000, Government, $100 etc..

Then total all the incomes together to find out exactly how much you are bringing in.

Calculating your Debt:

From there you need to gather all your bills, from Rent/mortgage, heat, hydro, water, phone, cell phone, internet cable, car payments, house insurance, car insurance etc.

Make a list of all your bills and beside them right how much they are every month, if it varies from month to month like your hydro go back to your last 12 bills and take your highest bills total.

You will then need to right when each of theses bills are due, weather it is monthly, bi-weekly, every other month. Also you are going to want to right beside if its a fixed or variable. Fixed meaning the amount never changes or variable the amount may change.

Now Calculate your total for this at the bottom.

Next we Calculate your debt:

So take a total of each of your debt from credit cards, line of credits. Once again make a note for each and what credit card if you have more than one, and same for line of credits, over drafts etc. Beside it you will need to write how often the payment is due and also make note of the interest rate for each credit card, line of credit.

Also right the minimum payment required each month.

Take the grand total of all your debt, and the minimum payment required each month.

Add up your totals from the debt and bills once you have done this deduct it from your household income.

So lets say your household income every month is $8,000 and your debt and bills add up to $5,000 you will only have $3,000 left over this will be used towards your other expenses such as groceries, clothes etc.

Creating a list of all your expenses:

This will include things like you cars gas, groceries etc. rrsp contributions etc.

So here is a example list for a $3,000 a month budget

Groceries $800

Clothes $100

Night out $200

Gas for car $400

Kids activites (school, sports etc.) $400

RRSP $500

Other: $100

total: $2500

So you have $500 left over which is great because now you are going to apply that extra money your debt. Why? because you don't want to just have to make your minimum payments on your debt. You will be paying so much in interest on it that it will take years to pay off and you will be losing so much of your hard earned money to interest. You want to pay off your debt as soon as possible. With that being said it is also important to save your money for retirement. Many people think they will have enough money for retirement with just there pension or the money they will get for the government which isn't true. Unless you plan on living in a cheap apartment living off of nothing not being able to do anything or go anywhere then go right ahead.

Now that you have created your budget you will be able to see exactly how much money you are bringing in and how much debt you actually owe and how much money you have left over for other expenses like groceries, going out, presents etc.

I bet it doesn't look good either. This is will be hard for a lot of people because they will think they need to put money towards a new purse or shoes, A new tv etc. Some people will also look at there numbers and go well this isn't right I don't like these numbers. Just go on living life the way it is accumulating more debt and being irresponsible with there money.

A lot of people just need to cut back on there purchases, eating out, going out every night or every week. All that money ads up and you will just beat yourself up at night and in the future.

Some people will even realize that there household income can only cover there bills and not cover t here debt and other things like groceries. If this is the case you will need to either move to a cheaper place, get another job etc..

So be smart create a budget and find out all your expenses. So your not spending money you DO NOT HAVE!!

 

 

 

 

 

 

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