3 Ways To Make Your First Budget

Tired of living paycheck to paycheck? Want to save for a big item? Overwhelmed by debt? A budget helps you keep track of where your money is going and gives you more control over it.

There are a few ways to approach this task depending on your needs.

Cash inflows - outflows = zero. What you earn is equal to what you spend each month.

Best For:

People who have a steady income each month or can accurately estimate their monthly income.

Process:

Compare your monthly income to your monthly spending. Make sure you prioritize your expenses. Set aside money for the most important expenses, such as rent, food, transportation, and healthcare.

Considerations:

• You have no savings left, which is not desirable.

• Consider putting your monthly expenses in a spreadsheet to keep track of them.

Try to save as much as you can after your expenses.

Best For:

People who are focused on saving their income or repaying debt.

Process:

When you get a paycheck, first set aside a specific, pre-determined amount for savings and debt payments.

Considerations:

• You may need to adjust your spending habits and focus on maximizing your savings.

• As you reach your savings or debt repayment goals, you can adjust the monthly "set" amount to focus on other financial goals.

Example Budget:

Key Concept:

Reduce or pay off your debt.

Best For:

People with outstanding debts.

Process:

Like the "Maximizing Savings" method, you might choose to put a pre-determined amount toward paying off your debt each month.

If you have multiple debts, focus on paying off the most expensive, high-interest debt first.

Considerations:

• You need to track the interest rate on your all debt and rank them

Gwen works as a server and earns about $2,200 per month.

She has been trying to pay off her student loans and also wants to save to move into her own apartment.

Which method is right for you?