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Creating a realistic budget is an important step for any homeowner. It’s especially important if you are in debt or have declared Chapter 7 bankruptcy in Tacoma. Making a budget may be the last thing you want to think about, but it’s a good way to put your income and spending habits in perspective to reveal areas where you could improve. It will also help reduce stress in the long run by giving you a realistic look at your finances. Follow these tips to create a budget for your home. Record Your Spending Habits Because everyone’s needs are different, there is no one budget that will work for everyone. Start by tracking your expenses over 2-3 months to get an idea of where you are already spending money. Use a pen and paper, the computer, or one of many free money management apps on your smartphone to keep track of your spending habits. Know Your Net Income As important as it is to know how much money is being spent each month, it’s equally important to know how much money is coming in. Figure out your net income each month by subtracting your employer deductions from your paycheck. What’s left over is the amount you have to work with as you create your new budget. Fixed Expenses Now that you have a better idea of how much money you make, it’s time to start dividing it up. The first category to look at is your fixed expenses: expenses that stay the same month after month. Your rent or mortgage payment will probably be the largest item here or anywhere else in your budget. Most experts recommend spending no more than 25-35% of your net income on your housing expenses. Other fixed expenses may include car payments, school tuition, or alimony. Other Expenses With the money that is left over, it’s time to tackle your other expenses. These include utilities, groceries, transportation, and anything else that you spend money on during the month. You should already have an idea of how much money you spend on each category, so try to divvy up your budget accordingly. For most people, food and transportation make up the majority of these costs, and each should average about 15% of your budget. Long-Term Goals In addition to your monthly needs, consider your long-term goals as you’re making your budget. For example, you may want to set aside a certain amount of money each month to save for an emergency. Or you may want to put it toward paying off your debt. If you have children, it’s never too early to start saving up money for tuition fees. Find Ways to Spend Less Once you have a rough draft of your budget, put it to the test for a few months. During this time, pay close attention to your spending habits and see if there are ways you can save money. Cut down on the expensive dinners out or take the bus to work instead of driving yourself. After you’ve seen how much money you can save, fine-tune your budget one more time. Seek Professional Help In some cases, it’s a good idea to get professional help with your budget. Talk to a financial advisor or certified public accountant (CPA) for help creating a budget. Many banks also offer financial advice to their customers. If you have filed for Chapter 7 bankruptcy in Tacoma, or are considering filing, talk to an attorney about how you can create a budget that will help you get out of debt for good. You may even be able to avoid bankruptcy altogether if you have a regular income and are able to stick to a budget.
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