To budget, you need to identify precisely your net income (after tax and other deductions) and expenses. For many in steady employment, knowing their monthly income is easy. But it can be a bit more complicated if you’re self-employed, work in the gig economy, rely heavily on tips or bonuses or have extensive investment income streams.
Look back through previous bank statements and other sources to see how much you typically earn, and build any seasonality into your monthly budgets. For example, if you get a big bonus every December, show that income in December’s budget rather than spreading it across the year.
Determining your spending can be tricky. It’s easy to know your fixed costs (a.k.a. “non-discretionary spending”) because they’re predictable. They’re the sums that go out regularly on commitments such as mortgage/rent, loan and minimum card payments, insurance, utilities, property taxes, homeowners association dues and so on.
In other words, they’re the things you can’t stop paying without major consequences.
The information contained on this website is for informational purposes only and is not an advertisement for products . The views and opinions expressed herein are those of the author and do not reflect the policy or position of Brokerage. Source: The Mortgage Reports