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Budgeting

3 Ways to Have a More Realistic Budget

Understand the importance of creating a realistic budget and how that leads you to save more money. Read further to know more.

Having trouble saving money at the end of the month is a common problem most of us face. No matter how careful you try to save a few bucks here and there, you’re often left with no savings. Having a realistic budget and saving a certain proportion of your wealth is very important, as you should have something to fall back on in case of emergencies.

How Do You Create a Realistic Budget?

You may be wondering how do you save money when there are just so many expenses? Rent, utility bills, monthly groceries, etc. Fortunately for you, we’ve come up with a few ways you can make a more realistic budget that will help you save money efficiently.

1. Calculate Total Income

First things first, you should know exactly how much money you’re making in order to create your budget. There’s an estimated amount and an actual amount. Whatever figure you’re bringing into the house should be accurate. There are often deductions such as income tax that you get on your total income. Apart from that, your employer might deduct money for other reasons such as being late to work. In case you own a business, you need to figure out the amount you’ll be taking home after paying your employees’ salaries and paying off other variable expenses.

2.  Calculate Expenses

After you know the exact amount available to you for utilizing in the current month, you then make a list of all the expenses due. Of course, expenses can vary from month to month. However, making a list of estimated expenses can help a lot when making a budget. For example, estimate your current month’s utility bill with last month’s data to give you a ballpark figure. In addition, have an idea of how much it will cost you to purchase groceries for that month. Finally, see if there any other miscellaneous expenses to be made and add them to your list as well.

3. Cut Back and Budget Effectively

Often, we make purchases that are not required. Either you go for a casual stroll at the mall or order your favorite comfort food in the middle of the night – you never end up saving anything. When you have an exact list of expenses in your hand, you can check if there is room to cut back on a few things. For example, is there any room not to buy a few groceries for that month? Something that is not really a necessity but a luxury. You can try splurging on certain purchases every other month. We mean, don’t make that luxury food purchase this month, and instead, purchase it next month to save some money.

Get Started on Your Realistic Budget!

Cutting back to save money is not the easiest. However, a realistic budget can help you do that. When you know about the things you mostly spend your money on, you’ll be able to save by not spending too much on them. In addition, having a budget also tells you if there’s some wiggle room to spend generously. When you have those facts in check, you’ll hopefully have a few bucks to save by the end of each month.

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Lori Abagony
Written By

Lori is a writer for YourMoneyMagic. She holds a masters degree in business journalism and literature from the University of Oklahoma. She enjoys reading a good science fiction novel and is often found hiking on the weekends.

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