Are you ready to take control of your finances? Are you stuck wondering “How do I keep track of income and expenses?” In order to get your financial life in order, there are some basic steps that can help you start managing your money and take control of your life.
Keep reading to learn more about how you can start to manage your finances better and reach financial freedom.
1. Make a Budget
One of the first steps you need to take when getting control of your finances is creating a budget. This is the best way to see how much money you have coming in, where it is going, and how much you should have leftover at the end of the month. Sitting down and putting everything in writing might seem like a daunting task but once you have it all down you can focus on how to move forward in paying off your debt.
If you are having trouble getting your budget started you can begin with keeping track of your expenses for one month. This will help you get organized and prepared for putting everything together.
2. Tracking Expenses
If you are struggling with debt and growing your savings then it is likely you don’t have a full understanding of what kind of expenses you have. There is an easy way for you to kick the habit of poor spending by keeping track of everything that you spend for a period of one month.
In order to do this, you will need to keep all of your cash receipts from grocery shopping, eating, ordering in from restaurants, or other purchases. Then check your bank statements for other expenses such as your utility and credit card bills, and purchases made using your debit cards. If you have bought anything with a credit card, that also needs to be factored into your monthly total.
At the end of the month, you will be able to see what your variable expenses are, such as eating takeout or your electric bill. Plus your fixed expenses, which are those that don’t change each month such as your rent or car payment. This will give you the opportunity to see what the whole picture of your finances are and make a plan for moving forward.
3. Knowing Your Income
Unlike your expenses, you probably have a fairly good idea of how much you make each month. It’s easier to know how much you have coming in rather than going out, especially if you share accounts with a spouse. Even if you have a fairly decent idea of what your income is each month you should still sit down and figure out the actual amount.
If you are self-employed this might be a little trickier since you might not be getting paid on a bi-weekly or monthly basis. You can get a better grasp of your income by using this simple pay stub creator to track your monthly income.
Once you have determined what your monthly total coming in is you then need to subtract your expenses from your income. If your total results in a negative number this means that you have spent more money than you made that month. This requires immediate adjustment and you need to begin reducing your spending until the total at least reaches zero.
If your total results end in a positive number, then you are already on the right track for paying off your debts or increasing your savings account.
4. Create an Emergency Fund
Once you have created your budget you will be able to see where you are spending your money and step back from spending on things that you don’t really need. Once you have cut frivolous spending and have a positive amount at the end of the month you can start building your savings account.
Ideally, you should have at least $1,000 in your savings account at all times. Once you have hit your savings goal you can begin sending your extra money at the end of the month towards paying off your credit cards. Start funneling this money towards one card, either the one with the highest interest rate or the one with the lowest balance first.
Make sure to stop using your credit cards for purchases, especially for items you don’t really need. If you are considering making a big purchase, save up your money towards that goal. While you are saving you will have time to really decide if you need or want the item and it also helps stop seeking instant gratification by making purchases with your credit cards.
5. Monitor Your Credit Report
Keeping an eye on your credit report is an important part of keeping track of income and expenses because it shows your major purchases and other debts. Your credit score makes a direct impact on your ability to make future major purchases like a new home or vehicle, or it can impact your ability to rent an apartment.
Not only does your credit score impact your ability to receive a loan or mortgage but your credit report can also show you errors in your financial history. Knowing your income and expenses will help you identify any errors in your credit report and give you the opportunity to fix these issues that might be affecting your score.
In order to continue working towards a great credit score, you should maintain low credit card balances and keep working towards paying off your debts.
How Do I Keep Track of Income and Expenses? Learn More Today!
Are you still wondering “how do I keep track of income and expenses?” Start by creating a budget, tracking what you are spending in comparison with what you are earning, and then creating an emergency fund. Once you have that established you can focus on paying off your debts and building a solid credit report.
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