Tag Archives: make a budget

How to Make a Budget

“To budget or not to budget?”, that is the question. 

If you are starting your journey on getting out of debt or refocusing on your current journey, having a budget is a great tool in the fight against debt. Creating a budget that works for you does take time, effort and discipline (it took me a good 3 months to get a workable budget going). Follow these 6 steps to creating a budget and soon you will start to make your money dreams come true. 

1) Assess your monthly income. Gather your pay stubs together and figure out exactly how much you’re bringing in each month. You need to know how much money you have to work with before you start to budget.

2) List your expenses.
Print this worksheet Where Does Your Money Really Go? (PDF) to help you list your expenses in the following eight categories: Housing, Transportation, Insurance, Food, Personal Care, Medical, Children, and Miscellaneous. Use your spending notes from the <a href=””>last post</a>, as well as recent credit card and bill statements, for a complete look at your expenses. List each expense in the appropriate category. Then, total your expenses.

4) Subtract your total expenses from your monthly income. The goal is for your expenses to be less than your income. If they’re not, you’ll need to tweak it some so that they are. This may mean cutting back or cutting out things like going out to eat or cable television. If you have any surplus, put it into your emergency fund or towards your retirement.

5) Keep track of spending. After you’ve created the budget for the month, keep track of every single penny you spend to ensure that you stay within your budget. You’ll be able to review how much you spent the previous month and adjust your budget accordingly. One of the best ways I’ve found to keep track of your expenses is Mint.com. You can connect your bank account to Mint, and each week you’ll get a report telling you how much you’ve spent on groceries, gasoline, etc. It can be very helpful and eye-opening to see your expenses broken down into a color pie chart; you may be surprised about what portion of your money is going to things like eating out.

One of the best methods of keeping track of your budget is to put the money you budgeted for certain things, like groceries, into envelopes. You only use the money in the envelope when making purchases for that thing. When the money runs out, you’re done spending in that category for the month.

6) Review your budget every month.
Each month, go over last month’s budget to see how you did. You’ll be able to see where you did well and where you can improve. After you review, repeat the whole process and make next month’s budget.