Once you have your expenses you can categorize them just like your income,
they generally fall into three broad categories:
Fixed expenses, like your mortgage, life insurance and car loans, these do not vary from month to month. These are the bills that you should pay off first every month to avoid falling into a debt trap. The money left over from paying your fixed bills usually goes towards flexible and discretionary expenses.
Variable or flexible expenses are for necessities such as utilities, groceries, clothing and transportation, and can vary from month to month.
Discretionary expenses include paying for vacations, entertainment and club memberships.
When you start to record your expenses, you will see how much you spend on extras such as eating out and shopping. Discovering how such spending hurts your wallet may motivate you to cut back on things you don't really need, and to start saving more every month.
A budget is an "early warning system" for any overspending and assists you to identify where you can start making changes to manage your finances and savings to support your desired lifestyle.
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