Following a monthly budget is one of the best ways to manage your personal and business finances. To follow a budget, though, you must create one first and sometimes that can be the tricky part. If you are ready to create a budget and follow it to help you manage your finances, the following information can help. Read these tips and make a budget that works for you.
Where is your money going?
The first thing you need to do is start by tracking the money you spend. It is important to write down, or record, every cent you spend. For instance, if you buy a soda pop from the vending machine, write it down. Each purchase, big or little, needs to be written down and accounted for. There are many ways you can do this. You can either carry a notebook around with you, find an app on your smart phone, or tally receipts at the end of the day.
If you are just starting your business, tracking your expenses is essential for your taxes. You should keep a record of all business purchases and expenses. Keep copies or scans of your receipts and invoices in a save place for your business’ tax records or deductions.
Start categorizing your expenses within your monthly budget
Once you have tracked your spending for several weeks, you need to start looking over it. Start to categorize the money you spend in a way that makes sense to you. For example, you might choose groceries, eating out, household bills, vehicle expenses and anything else that makes sense in your mind. Do not forget expenses that you pay once or twice a year, as well as things like clothes and oil changes that you do not buy all the time.
Be sure to separate personal expenses from business expenses. Unless, for example you use your personal cell phone for work. You can deduct a percentage of your cell phone bill as a work expense. *Just be sure you are honest in what you claim for a business tax deduction, as you can end up in hot water with the IRS. Your best bet would be to talk to an accountant. For home and online business accounting, check out NexGen tax and accounting services.
Where can you make cuts in your spending?
Now that you have your spending categorized, you can dig deeper into your spending patterns. Is there anything you are spending too much money on? Do you need to cut spending in an area or two? When you have a clear picture of what you are spending, you can sit down and start to make your budget.
Make a category for all the important spending in your life. It is important that your budget is realistic, though. For example, if you saw that you spent $700 on groceries for a month, do not make your budget $300. If you write down amounts that are too low, you will not be able to follow your budget and it will not work.
The same goes for your budgeting with your business; do you have a monthly advertising budget? What monthly subscriptions do you have? Regular supply expenses?
Decide how much money to allocate for each category of your budget
When your budget is created and you have decided how much money you will spend in each category, it is important that you follow through. One way to make sure you do not “cheat” is to have some “cheat” money in your budget. Give yourself an allowance, a small amount of money to play with. This will help you follow your budget and not take money out of other areas, so you have money to buy random things.
Are you ready to start creating a monthly budget?
Making a budget and following it is a terrific way to manage your finances. When you are on top of your personal spending, it can make your life a lot more stress-free, at least as far as money is concerned. Use the tips shared here and you can be on your way to a healthy and happy spending style.
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