How can I Create a Budget?

Diana Bocco

If you want to take control of your money and your financial future, the most important thing you can do is to create a budget. Knowing where your money is going is the first step to successful financial management.

Using coupons is one way to save money within a budget.
Using coupons is one way to save money within a budget.

To create a budget, you first need to understand all your expenses. To do that, take a blank piece of paper and jot down all your everyday costs. Make as many columns as you need for each topic; if you trouble remembering your expenses, check your checkbook or credit card statement. Some of the things you can include on your list are:

Frequent use of multiple credit cards leads to a more complex monthly budget.
Frequent use of multiple credit cards leads to a more complex monthly budget.

Budgeting allocates funds to various bills and expenses.
Budgeting allocates funds to various bills and expenses.
  • Housing and Utilities: rent or mortgage payment, insurance, electric/gas/water, phone bill, cellular phone
  • Household: groceries, school lunches, cleaning supplies,
  • Entertainment: cable TV, internet, book clubs/magazine subscriptions, sporting events, clubs, movies or clubs, vacations, hobbies, etc.
  • Transportation: car payments, public transportation, gas
  • Clothing/Beauty: haircuts, make-up, nutritional supplements, clothing and shoes, dry cleaning, repairs, etc.
  • Other: debt payments, healthcare, child care, investment, gifts, charitable contributions, etc.
Household groceries should be included when creating a budget.
Household groceries should be included when creating a budget.

Once the list is ready, write a fixed dollar amount next to each item. Add all expense amounts to create a budget that reflects your actual monthly expenditure. Now make a list of all your income sources. Besides your salary, how else do you get money? Contributions? Scholarships? Gifts? List all income sources and then add them up to come up with a monthly total.

Telephone and other utilities must be included as expenses when creating a budget.
Telephone and other utilities must be included as expenses when creating a budget.

Now that you have two final numbers, you need to actually create a budget. For that, start by comparing both numbers. If you have positive cash flow, your goal is to learn how to use the extra money: you could your credit card, save it, or invest it. If, on the other hand, the total expense amount exceeds the income, you need to trim the difference. Create a new budget to help you see the areas where you can cut back without suffering any lacks, such as cutting down on smoking, shopping around for cheaper insurance, or using coupons to lower your grocery bill.

A person who has trouble remembering their expenses should consider keeping them in a checkbook.
A person who has trouble remembering their expenses should consider keeping them in a checkbook.

The most important reason to create a budget is to keep control of where your money goes. The format matters little. Some people prefer to work with a daily planner, while others do better with some type of accounting software. The important thing is to create a budget you can live with it. Cutting out all the entertainment expenses may seem like a good idea at first, until you start feeling deprived. Rather, cut a little from each section and your overall budget will benefit without your feeling like you're robbing yourself of anything.

Many budgeting software packages are suitable for all skill levels and can be downloaded for free.
Many budgeting software packages are suitable for all skill levels and can be downloaded for free.

Readers Also Love

Discussion Comments

anon131670

Tried the free spreadsheets and manual entry tools web offered but of course, no time to keep it up and really make it happen.

Getting data from my bank to organize was solved by using a program called bank2budget which shows my net results on a monthly basis. Not sure if you would like to share this with your users of like interests. Take care.

Post your comments
Login:
Forgot password?
Register: