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3 simple ways to prepare a budget

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

tally up

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

let’s calculate

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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