If you find you are overspending, minimize some of the variable costs, such as groceries and entertainment. Try tracking all your expenses for a period of several months to get an average of your monthly expenses. If you fail to keep track of your expenses, unexpected bills may create a shortfall at the end of the month. Almost 80 percent of Americans are living from paycheck to paycheck, largely because of poor financial planning. Your first concern should be to ensure that you aren’t spending more than you earn. Unplanned expenses – These include doctor bills, car repairs, and unplanned entertainment.Variable expenses – These include groceries, gasoline, electricity, and phone bill.Fixed expenses – These include rent or mortgage, car payments, student loan payments, and cable bill.The best approach is to break your spending into categories, then list specific monthly costs under each category. Now you have to add up your expenses, which is never as straightforward as you think it will be. How much money do you take home each month? If you have predictable sources of income, then you should have a set amount of money each month to start with. When creating a household budget, you want to start with income. That’s why you should track every penny you spend every month. And even if you plan your monthly spending, there inevitably will be expenses that are not part of the plan. Part of the purpose of creating a household budget is so you can take charge of your finances, controlling where your money goes and ensuring you have enough to save for the future. A household budget can only work if you measure what you spend against what you earn. As the old saying goes, “you can’t manage what you don’t measure,” and too many people set up a budget without actually tracking where their money goes. Your household budget is the foundation of personal financial planning.
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