Better Make a Budget (MNP 3 Minute Debt Break)

At some point, everyone has succumbed to the impulse to buy a new gadget, a new pair of shoes or some other spur of the moment gift for themselves. There’s nothing wrong with occasionally treating yourself. But when frequent impulse purchases start getting in the way of your other financial goals, things can quickly spiral out of control. Knowing where to strike that balance is difficult, but it becomes much easier when you use a budget.

Start creating your budget by looking at your monthly income. This will include your employment income, rental income and anything else that falls under the “money in” umbrella. If some of your income is variable, you’ll need to estimate.

Now calculate the “money out” or expenses. This includes all the money you plan to spend over the following month. It could range from bills, to shopping and leisure costs. These expenses will be broken out into three categories : fixed, variable and occasional expenses. Fixed expenses are consistent monthly bills like mortgage payments or car loans. Variable expenses occur monthly, but can fluctuate like groceries or fuel. And occasional expenses could be clothing, vehicle maintenance and home repair costs.

Now, subtract your expenses from your income. This must produce a balance of at least zero but ideally you should get a positive number. If you don’t, you will need to either revisit your expenses and reduce your monthly costs or by review your revenue and identify how additional income can be generated.  Any surplus left represents your savings. If you have not yet, open a separate savings account and deposit these surplus funds into it each month. You will hope to never touch it. But in the event of an unexpected cost, this will be an invaluable lifeline.

The process of making a budget is really the easy part. The real challenge is sticking to the promise you’ve made to yourself to reduce your spending and adjusting your lifestyle to fit the new parameters. The longer you stick with your budget, the more frequently you track your expenses and with every time you stop to question your urge to make a purchase, the easier these new habits will become. The more managing your spending becomes second nature, the closer you will come to achieving your short-and-long-term financial goals.

If you’ve attempted to create a budget and are struggling to make it balance, an MNP Licensed Insolvency Trustee may be able to provide you with the Life-Changing Debt Solution you need. Contact MNP for a free confidential consultation to learn which one might be best for you.

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