Welcome to Professor Savings.com
We teach finance basics. Hi, I’m your host today Rayfil Wong.
Today’s topic, 3 simple steps to create a budget that works.
let’s talk about why we need one?
The main reason is that we are stimulated by visual objects. so take an example
If Jane is shopping at a shopping mall and she does not have a budget, she can wonder off and buy more
than she can afford + buy things she did not need so let’s begin.
#1 step is to figure out exact net income
total revenue minus total expenses equals total net income
salary + money made from investment and others
#2 now let’s jump over to Jane’s expenses
fixed ones include cell phone bills, cable tv, car
lease, insurance, mortgage,
same every month
variable bills are ones that differ each month
gas, utilities bills ( water + electricity ), groceries, and
entertainment spending like movies
revenue minus expenses equals net income if Jane has more revenue that expense she is left with net income!
hi five. Jane can invest or add to her emergency fund
on the other hand if Jane’s expenses out weigh her revenue then she has a net loss
#3 If this is the case she needs to cut down on her expenses
such as using a prepaid phone card or moving to a smaller less expensive house
so prepare you budget so you can do what you want when you want
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