Firstly, gather all your financial statements for the month. This will include anything from your monthly bank statements to utility bills. Basically you will need all the statements that had or will result in cash outflow. Gathering this information will help you get you face to face with your monthly expenses.
Next thing to do is to note down all your income funnels. You need to know where you are getting money from. This will include your salary, commissions, bonuses, investments, real estate, rental and whichever mode you have for income to find you.
Once you know your income inflow, find out what your monthly expenses are. Even if your expense is a dollar, make sure that is noted. Mainly you will have expenses such as car loan, mortgages, insurance premiums and your kid’s college fees. This is where you identify all your spending details. This is also known as your expenses. Identify all and then break them up into two sections.
One section will be those expenses that are fixed. This would be expenses such as mortgages, car loans, insurance premiums and the likes. The other section will be your expenses that are variable from month to month. This will include your grocery expenditure, entertainment expenses and impulse spending.
Now is the time to sum up your cash inflow and cash outflows. Sum up all your incoming income and sum up all your outgoing expenses. If you are getting a negative figure, you are already in the red and your budgeting will see a lot of cutting down on expenditures.
Otherwise review your expenses and identify those expenses that you can reduce and those that you can eliminate. There, you have done your very first budgeting exercise. Now, be sure that you do this on a monthly basis.
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