Making a Budget

Hey, wouldn't it be wonderful to have enough money for the things you need in life? Not everything, maybe, but the things that are truly important to you and your family. If this feels like it's out of reach for you, take heart. Budgeting (yes, that dreaded word) or having a "spending plan" can help and it doesn't have to be painful. Better yet, it can keep you out of debt, or get you out of debt if you've found yourself struggling to keep your head above water.

Keeping a close eye on your budget can also help you identify wasteful expenditures, adapt as your financial situation changes and ultimately achieve your goals. If you've never actually examined a breakdown of your expenses, you may be surprised by what you find.

Here's a quick guide to making a budget.

Gather your receipts and records

This includes bank statements, investment accounts, utility bills and any other information regarding your regular expenses; the more details you can gather the better, since the goal is to create a clear picture of your monthly averages.

Document your monthly income

Collect your pay stubs, or income records if you're self-employed or have any outside sources of income; record this total income as a monthly amount.

List your monthly expenses

Create a list of all your regular expenses including mortgage payments, loans, insurance, groceries, gas; essentially, everything you spend money on each month.

Calculate your totals

You'll have a list of what's going out each month and what's coming in. If your end results show that you have more income than expenses, you're off to a good start. If you have more expenses than income, don't worry, but know that you'll need to make some changes.

Make adjustments

If your expenses exceed your income, looking at it on paper can be an eye-opener. Review your monthly payments and think carefully about what you can change. For many of us, dining out and entertainment are a great place to start cutting back. Do you really need to buy a lunch every day, or could you bring something from home? These kinds of small changes can go a long way to resolving money woes.

Review your budget monthly

Congratulations, you've taken an important step in managing your money and your life. But just like a golf swing, follow through is important. Review your budget each month and compare your actual expenses to what you wrote down in the budget. This will show you where you did well and where you may need to improve.

 

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