Making a budget on your income is very important. Many people don’t spend time to make monthly budgets for their expenses because they think it’s a lot of work. You must see that budget making is not actually a strain on your life, rather see budget as a necessary tool that will maximize the limited monetary resources you have. This is because a budget can determine how you allocate your money based on your savings plan and your level of income.
Before you create your monthly budget, you must determine your monthly income first. If you have a fixed salary you can use that amount as the starting point of your budget. However if you make other bonuses you could exclude that. It will boost your willingness to follow your budget strictly.
A savings target is very important. Before you allocate funds for spending, first of all make sure you set aside an amount for saving. This amount should be targeted for your future goal such as buying a home, retirement or any other big purchases. It is also advisable to create multiple savings accounts for multiple goals. However if you aren’t yet sure of the specific goal you want to save for, you can save at least 15% of your after-tax income. This will at least provide you with a safety cushion and some retirement savings while you work to establish your goals and life plan.
On the other hand if you make a significant portion of your income from commissions, you will need to use your best judgement and use a conservative percentage. Let’s say 60-80% of your commission income from the last 6-12 months. The more confident you are in maintaining the commission, the higher percentage you may use.
Budget for spending also comes next. Spending budget can be categorized into two: the needs and the luxuries. Needs must always be first to be budgeted for. The luxuries on the hand can be cut down on sometimes.
Have self-discipline if you want your budget to work to for you. Making a budget is one thing, following it is even more important. What is the use of a budget if it is not followed?