Before you can create your budget, you need to know what you have to work with. Think of this step as a simple equation. Add up your income and then subtract your expenses.
Translating your life into a list of income and expenses may seem overwhelming at first, but it’s well worth it. Add your different sources of income together and then subtract each expense. Ayco provides resources for clients, or you can perform a quick search online to access templates or tools.
If your expenses are higher than you expected or feel comfortable with, try to reduce spending where possible. To lower your expenses, you could:
Whether you just want to better understand your cash flow, are trying to pay down debt or want to build up your emergency fund, budgeting can help you get there.
Look back at the difference between your expenses and your income. If you find yourself with extra money at the end of each month, it’s money you can put toward your goals. Even if the amount seems small now, it could make a big difference in the long run.
Tip: To make saving for your financial goals even easier, try setting up automatic payments. For example, if your goal is to add to your emergency fund, you may be able to set up a direct deposit from your paycheck to this account.
Building a monthly budget is simply the first step. It may take some getting used to, but once you’ve been following your budget for a few months, you’ll start seeing the benefits. And if it doesn’t seem to be working, you can always adjust as needed.
Budgeting can pay off in normal times, but it is critical in times of uncertainty. A good budget will help you meet your everyday expenses, discover new ways to save money and stay the course for your long-term financial goals.
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Updated for tax year 2020
Updated for tax year 2019