Reverse Budgeting: How to Pay Yourself First

With a somewhat decent career and income, I was always a bit perplexed as to where all my money was going each month. In other words, it's time to learn how to reverse budget and pay yourself first.

1. Add Up Your Income

Figure out your monthly net income. This is not your gross salary, this is the amount of money you see in your bank account every two weeks.

2. Add Up Fixed Expenses

Fixed expenses refer to your reoccurring bills such as: 1. Housing 2. Utilities 3. Insurance 4. Fuel 5. Daycare

3. Subtract Your Fixed Expenses

Subtract your fixed expense total from your monthly income. The left over amount is what you will use to determine how much to save (for yourself) and how much to spend.

4. Pay Yourself First

Paying yourself first can include using your money to: 1. Increase your emergency savings 2. Paying off bad debt like consumer debt or student loans 3. Investing in your retirement accounts

5. Spend Last!

Knowing how much you're going to spend before you spend it is one thing, but knowing you already paid yourself first and set aside money for bills is another.

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