Do you need help with your finances?

Regardless of how much you make, managing your money can be overwhelming. From bills to taxes, investments and more; keeping track of everything can seem like a full-time job but that’s why we’re here to help.

Not only are we experts when it comes to personal finances but we understand just how important they are to a person. So why not begin getting control of yours by following our step by step guide below on how to create a budget.

1. Gather Your Documents

The first step to any budget is to know exactly where your financial standing is. This means you will need to know exactly how much money you have coming in during a given month compared to how much money you have going out.

To get this done, gather all of your documents and make note of all of your payments. Payments can be from employment, government benefits, investments, etc.. These income payments will need to be compared against all your expenses. Expenses are things like a mortgage, hydro bill, debt payment, etc.

Although gathering these details will be tedious, doing it will be able to give you a clear picture of how much you earn vs. how much you spend in a month. And only then will you be able to make good financial decisions.

2. Categorize Every Expense

Once you have all your documents gathered, you will need to categorize each transaction into a category. For example: food, bills, entertainment, gas, savings, etc. Tracking expenses this way should be done for at least 3-6 months in order to get an average for every ‘category.’

3. Spot Unnecessary Spending

The next step in forming a budget is to identify the categories that you can cut back on. Things that are ‘non-essentials’ should be considered first. This would be things like, entertainment, clothing and take-out which are all expenses that add up quickly but aren’t necessary. 

Once you’ve reviewed your ‘non-essential expenses’, consider heading through your ‘essential’ expenses to identify any areas that you could potentially save on. For example, if you are in the process of paying off debt, consider reviewing the terms of your loans or credit cards to see how high your interest rate is. If it is high, try calling the lender to re-negotiating a new rate. Another option is to consider consolidating loans if multiple lenders are owed.   

4. Identify Goals and Set Limits

Creating a financial goal is another important step to forming a budget. Whether the goal is to pay off debt, save for a vacation, or to start putting money aside for your child’s education; you need to know what you’ll be working towards and how much it will cost.

Once a goal is decided on, and you know how much you need to save for it to be achieved,  you should set a limit for each expense category in a given month. That way, you know exactly how much to put aside each month and feel motivated to do it instead of being sad about it..

5. Review and Adjust Regularly

Creating a budget once does not mean that it’s set for life. After all, life changes quickly which is why your financial plan should too. This means you will need to review your budget regularly to track spending and to readjust or re-prioritize certain things to maintain momentum.

By following these steps, you can take control of your finances to build a better future. So contact us at A.P Accounting and Tax Services today and let us help you create it.

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