Whether you manage a household or run a business, you need to have a clear plan for your money. Without one, you may end up in debt or spending more than you earn. The solution is budgeting, which can help you gain control over your finances and reach your financial goals.
In economics, a budget is a statement of estimated revenue and expenses for a specific period. It is also a useful tool for personal finance, business management, and planning governmental expenditures.
When you create a budget, it is important to break down your monthly income and expenses into categories, such as fixed costs (mortgage, car payments, utilities) and variable costs (food, clothing, entertainment). You may be unable to change some of the fixed expenses in your life, but reviewing the variables can help identify areas where you can save money. For example, you could reduce your dining out or entertainment expenses by cutting back or working extra hours to make up the difference.
For the most accurate results, track your spending and income for several weeks using whatever method works best for you. This might be an app on your phone, a spreadsheet, online template or just good old pen and paper. You may be surprised at what your budget reveals. Perhaps you are paying for subscriptions or services that you no longer use, which can free up money to save or put toward debt repayment or a goal.
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