Whether you’re looking for a way to save more money, pay off debt or just get a handle on your spending, budgeting can help. But there are many types of budgets, and which one is best for you depends on your unique situation.
The basic budget is the simplest and most effective: Simply divide your total income by your total expenses to find how much you should spend each month. This method works best for people who are comfortable with meticulous record-keeping. You can track your expenses using a spreadsheet, budgeting app, credit card statements or good old pen and paper.
Next, calculate your monthly fixed expenses and variable expenses. Fixed expenses are the ones that stay the same each month, like your rent or mortgage payment, cell phone bill and garbage fee. Variable expenses are those that change from month to month, such as groceries, eating out and entertainment. If you have a hard time estimating what you spend on things that change, try looking at past credit card or bank statements to help you make accurate estimates.
Once you know how much you should be spending each month and have identified any areas that may not fit into your budget, you can start cutting back or saving. For example, if you find that you’re spending a lot on streaming subscriptions and you can cut those, you’ll have more money to save or put toward paying down debt. Be sure to review your budget on a regular basis, especially if you get a raise or experience other significant life changes that can affect your income or expenses.
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