Home Finance 9 STEPS TO MAKE A MONTHLY INCOME BUDGET

9 STEPS TO MAKE A MONTHLY INCOME BUDGET

Budgeting is one of the most important things in this financial world, Budgeting is all about making a plan to spend your money, That plan is a budget but (How to create a monthly income budget?) Budgeting is simple making of a plan to balance your expenses with your income, 

Let’s know How to do Budgeting?

LEARNING POINTS

1.  INCOME BUDGET (OVERVIEW)

2. CALCULATE INCOME

3. SAVE AT LEAST 10 OR 20% OF YOUR  INCOME FOR A TROUBLE SITUATION

4. CALCULATE EXPENSES

5. CHANGE YOUR BUDGET IF THE SITUATION GOT WORSE

6. AVOID DEBT AS MUCH AS YOU CAN

7. SET FINANCIAL GOALS

8. THE IMPORTANCE OF KEEPING AN INCOME BUDGET

9. HOW NOT MAKING  BUDGET AFFECTS YOU AND YOUR FAMILY

10. CONCLUSION

11. FAQ’s

1.  INCOME BUDGET(OVER VIEW)

Income budget (Over view)

Creating an income budget is not a big thing if you have little intelligence and a discipline of spending money

Creating a budget is very important for developing the spending habits, saving and investing money for the long term You can also learn to do budgeting if you follow the points below

2. CALCULATE INCOME

Income for income budget

First, you have to calculate your income, you can calculate it by different methods here we are talking about the gross income, not net income

Calculate monthly and hourly income

Firstly calculate the monthly income

For calculating the monthly income If you are getting paid on monthly basis(Divide your annual salary by 12)

For Example: If your annual salary is $62,000 then monthly salary is (Annual Salary ÷ 12) ($60,000/12= $5000)

Secondly calculate the monthly income if you are getting paid on hourly basis

For calculating that income (Hourly Pay x Hours/week x 52 ÷ 12)

Hourly pay= Payment which you get for one hour

Hours= Number of hours you are working 

Week= Number of weeks

For Example: If you are paid $25 per hour and work let say 8 hours a day, 40 hours a week

then your weekly income is 25*40/1*52/12= $4333.33….

You can calculate your income by this income calculator

If you are a business owner Your incomes sources are more than one 

Here I tell you different income which one comes from

1. Profit Income

2. Interest Income

3. Dividend Income

4. Rental Income

5. Capital Gains

6. Royalty Income

Calculate and apply the same rule

3. SAVE AT LEAST 10 OR 20% OF YOUR  INCOME FOR A TROUBLE SITUATION

Coins in the jar

Once you have earned money, especially the first income Do Not waste it in other expenses like Party, Gaming, Travelling and others

First of all, put 10 or 20% of your income on a side, In the first couple of months, you may find it difficult but after some time you do not feel any issue in saving that money. That money gives you a sense of security Because who knows what will be happened in the next few years of life

4. CALCULATE EXPENSES

Expenses for income budget

Now you have calculated your income, now it’s time to calculate your expenses

First I give a list of expenses below

Car Payments

Electric bills 

Gas bill 

Water bill

Food and dine

Membership and Subscription like Gym, Netflix

Health Care

Pet Care 

Personal Care and others

Write down all of your expenses on a list

5. CHANGE YOUR INCOME BUDGET IF THE SITUATION GOT WORSE

You can make your own budget as per your income but there are certain rules which you should follow if you have no idea for How to make a budget

Let me share some budget rules with you 

1. 50/30/20 rule: This is a budgeting rule in which 50 defines that spend 50% of your income on your basic needs/expenses, 30 means that spend 30% of your income on your personal wants/desires,

20 means that save 20% of your income and pay off your the debt from that income or investing that 20% in somewhere like stocks, mutual funds

You can check out our blog on 50/30/20 rule

2. 80/20 rule: This rule 80/20 defines that save 20% of your income that can pay off the debt and spend 80% of your income on everything you want to buy, there is no any restriction unlike 50/30/20 rule where you to restrict yourself on needs and wants

3. 30/30/30/10 rule: The rule 30/30/30/10 defines that 30% of your income goes to savings/investments and 30% of your income goes to debt repayment and 30% of your income goes towards your expenses and last 10% should be saved for any circumstances or you can use it to go for a vacation

4. 70/10/10/10 rule: The rule 70/10/10/10 defines that spend 70% of your income on your expenses and invest 10% of your income and save 10% of your income and give 10% to the charity

Now it depends upon you which rule fitts you the most,

6. AVOID DEBT AS MUCH AS YOU CAN

 Avoid debt as much as you can because there are very bad and harmful side effects of debt not only on your financial condition but on your health also

1. DEBT CAN CAUSE DISEASES:

The first harmful effect of going into debt is debt can cause you stress and Hypertension.

If you are in debt you are worried about How to repay it and this all-time worry causes you stress. Due to stress you can increase the chances of heart disease, asthma, obesity, depression, and other diseases caused by stress.

2. DEBT CREATES AN URGE TO BUY SOMETHING WHICH YOU CANNOT AFFORD:

The second harmful side effect of going into debt is debt produce an urge in you to buy those items which you even can’t afford

If your credit card is in your pocket and you are going to buy a new phone Your budget is $200 but when you enter the shop and you look to the brand new iPhone 11 pro max 512 GB and the price of that iPhone is $1500

you buy it using your credit card your budget was $200 but due to this credit card it creates an urge that urge forces you to buy that brand new and expensive phone

3. DEBT KEEPS YOU AWAY FROM ACHIEVING YOUR FINANCIAL GOALS:

The next side effect of going into debt is keeps you away from achieving your financial goals, What can be a financial goal for a person A Car, A house, A heavy bike How could you achieve them if you are already in debt

The next harmful side effect is high interest make your products more costly, If you are buying a phone for $1000 that’s a normal price but if you are buying it with an interest rate of 20% it will cost you $1200 that is higher than you pay as compared to normal one’s

Debt can badly affect your income budget and your life as well

7. SET FINANCIAL GOALS

Setting financial goals is very important in life because these financial goals makes you happy. What can be a financial goal for a person? A Car, A House, Financial Freedom

Here I give you some tips to achieve your financial goal

Where you are and where you wanted to reach: First write your current financial situation and then where you wanted to reach and then think How can I reach at that part, Now pick a high in demand skill and polish it and then sell your services on different mar

8. THE IMPORTANCE OF KEEPING A INCOME BUDGET

1. The importance of making a budget is budgeting is like a DEAD-END means you don’t have to spend money if you are out of budget or if you have no money,

2. The importance of making a budget is It will help you in emergencies as we discuss some of the budgeting rules they have one thing in common. That is (SAVINGS). Savings will help you in any trouble

3. The importance of making a budget is it will help you achieve your goals faster if you are spending money according to your budget and save some of the money that will help you in achieving your goals

4. The importance of making a budget is It will help you to be organized with your income and expenses, If you have a discipline you can cut your expenses in any way

9. HOW NOT MAKING INCOME BUDGET AFFECTS YOU AND YOUR FAMILY

Budget Hand writing

Above we have discuss about budget and importance of income budget 

How we will discuss not making budget will affect you and your family

Without a budget, you can not know where to save the money and where to spend the money because there is no track or record of that money

That’s why without a budget we don’t know where the money goes? Without a budget you will spend all of your money and if you spend all of your money? You can not save not even a penny and that’s very dangerous for retirement

10. CONCLUSION

First, we talk about the budget overview and then you have to calculate your income and then save at least 10 or 20% of your income because saving is very important and then calculate expenses and make a list of all your expenses and then change your income budget according to your financial situation

avoid debt as much as you can because debt is a plaque and after that we discussed How to set financial goals? and then comes (The importance of keeping a budget) and finally we talked How not making an income budget can change your life from good to bad

11. FAQ’s

Is making a monthly budget important

Yes making a monthly budget is very important because If you where your money is going How will you manage that money

What are the important points in a budget?

There are three important points in budget
1. Income
2. Expenses
3. Savings

What is most dangerous thing in money?

The most dangerous thing in money is overspending

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