By creating a budget, you will gain a new perspective on your finances.
This allows you to prevent yourself from making bad financial decisions, and in turn start saving
If you don't have a solid understanding of your personal financial situation,
you're liable to be spending too much money in general. This might lead to buying a home or a car
that you actually can not afford. Or you could be going on through life without saving any money
along the way. But this is all very easily prevented.
Everyone needs to have money saved for when they're older, because no one can work forever. The earlier you start
budgeting, the easier your retirement will be. And if you stick to your budget, you may even be able to retire a little early!
What is a good income-to-expenses ratio?
This should be at least
10% Income / 90% Expenses
This way, for every $10,000 you make, you'll have an extra $1,000 of money
that can either be saved or to be used at your discretion. You'll be able to do more recreational
activities like going out to the movies or taking vacations. A higher expense ratio makes it much
harder to save money, and your spending habits should be modified.
What is discretionary income?
This is extra money that's left over, AFTER all expenses have been paid.
Many people don't realize what their discretionary income actually is, and end up overspending,
causing them to not be able to save any money. Once a discretionary income figure is realized,
it should not be overspent, if saving money is a goal.
Initially itís best to do a budget on a yearís basis. The reason is that there
are some expenses which are only charged once or twice a year like car/health insurance payments.
Also, holidays like Christmas only come once a year. If you make a monthly budget, itís easy to forget
expenses like these.
BudgetMath makes it easy to enter all of your expenses for the year. Then you
can break them down into monthly, weekly, or even daily numbersówith the click of a mouse.
Can I use BudgetMath to make a budget for a family or small business?
Yes! Just make sure of the following:
1) Enter ALL INCOME SOURCES into your budget! Make sure you don't miss any.
2) Enter EVERY single expense into the budget. If any expenses are missed from anywhere, the budget won't be accurate.