6 steps to creating a budget, We all want to know how to maximize our income and make it work without staying in debt. For this, we have to know how to create a budget. Here are some steps to create your budget quickly and easily:

1. Identify your income

First, it is necessary to identify your income, both fixed and variable, as tax-free. Remember that a fixed income is one that you receive with a constant frequency and for an established amount. On the other hand, variable income is that which is not recurring and does not have an established amount, such as bonuses and commissions, among others.

2. Identify your expenses

Remember that expenses are all those money outflows that we make to acquire a good or a service. No matter how small they are, we must always know what is coming out of our pocket and thus avoid the famous expenses. This way, you will be able to identify which expenses you could cut to save or use that amount for something else.

3. Classify your expenses

You can classify your expenses into fixed and variable, which belong to two large categories, necessary and not necessary.

Fixed expenses are those obligations that have a certain regularity and their amount is defined. On the other hand, variable expenses are all those expenses that are not defined and change according to the activities or consumption carried out in a period. However, it is important to recognize that some of these expenses are essential to maintaining a basic level of living and functioning. In contrast, others may be adjustable or avoidable (not necessary).

Among the necessary fixed expenses are the payment of your mortgage or rent, the payment of insurance and taxes related to the property, and the use of the transportation that you need for your daily activities, among others. On the other hand, the necessary variable expenses will change according to your consumption each month or according to unforeseen events, for example, the payment of services (water, electricity, internet, telephone, etc.), your basic food, your consumption of gasoline, clothing, cleaning products, doctor visits, or emergency expenses.

Among non-necessary fixed expenses, there are subscriptions to streaming services or memberships to clubs or gyms; while non-necessary variable expenses represent entertainment and leisure, such as outings to restaurants, movies, concerts, and luxury purchases, among others.

4. Make a budget

Now that you have identified your expenses, subtract them from your income and the result will be the balance you will have available. If your balance is positive, it means that you have room for savings. If your balance is negative, it means that it is necessary to evaluate expenses, cut those that are expendable, and thus not increase your debts or financial commitments. It is also important that you consider that savings should not be the money you have left over each month and that it is always preferable to allocate an item for savings within your budget from the beginning. Watch the following video to learn more about how to make a monthly budget:

5. Compare and adjust

If you feel that your budget was not accurate in any area, you can modify it to make it more accurate from month to month. This way, you can compare it and see in which areas you need to make adjustments.

6. Maintain a balance

Maintain balance and stability in your finances. There will be times when there are more expenses than others, such as the holidays, but always aim to maintain a balance. If this month you have more expenses than you had planned, that implies that in the following month, you will have to adjust your expenses and try to reduce them.

Build your budget and enjoy financial health. Don’t let debt or lack of planning take away your peace of mind!