Tips on Creating a Budget

Don’t be scared off by the “B” word. It is really just a way to organize your finances. All you need is a very simple basic budget! There is no reason to make it complicated. Your budget should be flexible and change according to your current needs.

In order to create a realistic budget, you must get an overall picture of where your money is coming from, when it comes in and what you are spending it on.

Getting Started

When starting your budget either write it on a sheet of paper or create a spreadsheet on your computer.

Get clear on your Income

First, you must make a list of your monthly income. How much money do you have to work with?

This would be your take home pay (after deductions and taxes).  Remember to include all income which can be from many sources such as – tips, child support, interest, pension etc.  If your income is irregular, you will need to average what you earn to get a monthly amount.

Keep Track of your Expenses

Next, every day for at least two or three months, you must keep track of what you buy. This will include everything from groceries, your daily coffee, to the parking meter. Write it down in a notebook or keep all of the receipts. Doing this will help you understand your spending habits and will allow you to make a budget.

Creating your Personal Budget

Based on tracking your expenses, you should establish a target for both your your fixed and variable expenses – they should total less than your income.  Fixed expenses tend to stay the same each month or pay period, such as rent, mortgage or utilities.  Variable expenses vary each pay period, such as entertainement or dining out. 

Be sure to include savings (as an expense) for an emergency fund. Set up a separate account to prepare for the unexpected such as car repairs, illness or loss of employment, unforeseen bills etc.

You should be able to set aside 10 percent of your net income for savings on a monthly basis.

Re-evaluate on a Regular Basis

Look at the different categories and decide if you are happy with how you are spending your money. Adjust expenses that you are not happy with and create a new plan. Your expenses and income will change and so should your budget.

Remember that following a budget does not mean that you have to torture yourself, you just have to be more selective your choices.  If you budget doesn’t work out exactly right the first time, don’t be discouraged.  A budget is a guide.  Always remember to review and revise your budget.  You’re on the way to a Fresh Start.