Budgeting is a financial exercise highlighting your earning, spending, and saving habits. It provides you with an overview of exactly how much money you’re making, how much money you’re spending, and how much money you’re saving over a specific period of time.
The good news is that creating a budget isn’t the hard part; sticking to it is where most people fall short.
Totalling your income
For me, personally, the first step has always been calculating my total income before even worrying about my expenses.
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Totalling your expenses
One of the most overlooked outcomes here is not that totaling your expenses indicates just how much you’re spending, but that it provides actionable insight to help you understand how and where you should be allocating your hard-earned money.
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Let’s calculate!
By minus your total expenses (calculated above in step 2) from your total income (calculated above in step 2), you’ll arrive at a number that’s either in the green or red, so to speak.
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Create your spending plan
The insight you’ll gain by knowing whether or not you’re in the green or red , along with exactly how or where you’re spending your money, can and will help you understand how and where you should be allocating your money.
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