How to Make a Personal Monthly Budget | OK Carz

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Tips for Deciding How Much You Can Afford Every Month

Want to control your spending every month? Don’t have a set budget? Here, we will help show you how to make a personal monthly budget so you have a better understanding of how much you can afford every month. Here are a few tips you should follow.

Determine How Much You Make and Spend

Couple reviewing their expenses while they are setting a budget

Before allocating the amount of money you can spend on different things, you need to get an idea of your current income and monthly expenses. First, collect recent paystubs and calculate how much you make in a month. Record the amount you take home each month after taxes are taken out.

Next, gather all of your bills that you paid last month. Separate fixed expenses away from variable expenses. Fixed expenses are those that don’t change each month, such as student or car loans, monthly insurance payments, mortgage, and rent. Variable expenses will fluctuate month per month, such as the amount of electricity you use, how much you eat out, gifts, entertainment purchases, and the amount of merchandise you buy from a store. If your variable expenses tend to fluctuate a lot, take a look at your expenses from the past two or three months for an approximation.

[ READ MORE: How to Make Money While in Quarantine ]

Review and Make Changes

Once you’ve collected all the numbers you need, add up the expenses, and see how it compares to your income. Your expenses should always be lower than your income, so if that’s what you see, you’re off to a great start.

Ideally, you will want to save roughly 20% for savings and other future investments. If you’re not saving quite enough, or are exceeding your income, it’s time to consider which expenses to drop going forward. Specifically, you will want to review the unnecessary wants in your variable pile. These are purchases that you can live without. A few examples include dining out, movie theater visits, and expensive merchandise purchases such as jewelry, video game consoles, and home decorations. We recommend following the 50/30/20 budget rule to determine how much cash you can set aside for more luxurious purchases like these.

Track Your Expenses Moving Forward

It’s always good to set a budget before you start spending. However, that budget is no good if you don’t follow it. Track your expenses moving forward to make sure you are staying within your budget as it can be surprisingly easy to accidentally overspend.

Need more tips and tricks like this? Follow the OkCarz blog for more information on how you can better manage your finances.

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