When you live alone there is not another person to rely on when it comes to paying the bills or saving for the future.
You may find that you have a lot of expenses and not barely enough income to cover the. Maybe you are in the situation that many U.S. citizens find themselves in where you have to decide each month which of your bills you are going to have to pay late. The only way to get ahead and live more comfortably on your on is to use accurate data to create a realistic budget for yourself. However, you must also understand the purpose of a budget. Your goal should be to use your budget to track your spending and adjust your spending habits, as needed.
Your budget may change as your circumstances and preferences do. As you gain a better understanding of your spending habits through budgeting, you can allocate your funds better. Then you can lead a financially comfortable lifestyle. There are many tricks you can use to make the budgeting process easier and less time consuming than it would be otherwise. Below are some tips for creating a budget to get you started.
The first step in the process of creating a budget is knowing how much money you will have to spend monthly. If you have one job and receive a set salary, this task will be easy. However, multiple jobs or irregular hours can make calculating what you earn monthly more difficult. If you are self-employed or do not have taxes taken out of your wages ahead of time, you must also subtract the approximate amount you will need for taxes from your available monthly income.
If your income is unstable, you have two options for estimating the monthly amount you can spend. The first is to average your earnings from the previous twelve months. The second is to use the amount you made during the leanest month of the 12-month span as your guide. Using the latter strategy, you will be less likely to experience unwelcome financial surprises. It is unlikely you will earn less in a given month than you did during your least lucrative month of the previous year.
Tracking your predictable expenses is essential, especially when you are single. You must set aside enough money each month to pay your bills or risk losing certain services. In a worst-case scenario, you may even lose your home, if you are unable to meet your obligations. Predictable expenses include:
It is also important to allocate funds for somewhat predictable expenses. For example, gas prices change all the time, so you cannot determine exactly how much money you will need for fuel. However, you can estimate an amount based on your travel habits and current fuel costs. Other somewhat predictable expenses for which you must allocate some funds each month include:
If you are wondering how to figure out how much money you may need for the expenses above, the answer is to track your spending for a period. The longer that time period is, the more accurate your budget is likely to be. However, tracking your expenses for as little as a week can give you valuable information about your spending habits. You can use the information you gather to identify spending habits you can curtail to help you save money.
There are several ways to track how much you spend. One option is to use a simple spreadsheet. As long as you input data accurately, you can set the spreadsheet to calculate totals for you. That will provide you with constantly updated data. Alternatively, you can use an online money management website or phone application to track your spending. Many such apps can make recommendations to help you cut monthly costs after analyzing your spending. If you are financially able, you can also use your credit card to track your spending. Use it for all purchases for one month, and then examine your credit card statement for indications of categories where you are overspending. However, you must not use the credit card tracking strategy unless you can afford to pay back what you charge.
Some useful apps for tracking your expenses include:
Incidental spending is any spending you do on small things throughout the month. Perhaps you stop for coffee every morning before work. Maybe you enjoy seeing movies occasionally. Whatever your hobbies and habits are, those small expenditures can quickly add up. You may have difficulty setting aside enough money for incidentals at first, but after a month or two, you should get a clear sense of how much money you need.
You also have to anticipate times when your incidentals budget may need to be increased. For example, if you have just moved into a new home, you may require furniture and other household goods. Therefore, your initial budget will require a large amount for incidentals. A few months down the road you may be able to scale back spending in that category. You can then put extra money toward another goal, such as paying off debt.
A common budgeting suggestion is to always have enough money saved to cover at least three months of expenses. Some experts recommend a cushion equivalent to six months of expenses. However, you may find that impossible when you live alone and yours is the only income. In your initial budget plan, set aside any amount you can afford. From that point forward, make it a long-term goal to increase the amount you can set aside monthly. Do so by finding other sources of income or reducing the amount you spend on unnecessary expenses, such as dining out. If you find this difficult to accomplish or remember, set up your online banking and transfer a small amount into your savings each month.
If you do have plenty of money to designate for savings, choose how to designate it wisely. You may decide to create a single emergency fund. Alternatively, different accounts can be used to save for different purposes. For example, you can set up accounts for any or all of the following: