How to Establish a Budget

Video Transcript

"This is financial adviser Patrick Munro on how to establish a budget. A budget is probably the most financially empowering situation that anyone can do, no matter how modest their financial situation is. It's really quite simple: you take the amount of income that you do have coming in on a regular basis. And you take your expenses. And those expenses vary from fixed expenses to variable expenses. What are fixed expenses, you ask. Well if you have rent or a mortgage payment, that tends to be a fixed monthly expense. A car payment is also a fixed monthly expense. Perhaps a student loan, as well. You literally set these fixed expenses up in a template or column, using a manual pad or even computer software. And then add to that your variable expenses, which are credit cards, various bills that you may have; some on a regular basis, some not, and any luxury spending you would do. And that forms your expenses. And then you take away your income, and hopefully there's money left over at the end of the month. And that is your emergency fund. This is Patrick Munro talking about how to develop a budget."