How to Make a Budget You’ll Use Consistently

While the news world is all a flutter with the reasons why you need to have a budget in order to manage your money, many information sources fail to mention the most important part – not only do you need to create a budget, it needs to be reasonable enough to use well into the future and you also need to use it. All too often, people set out with the best intentions to take control of their money. Unfortunately, those intentions are not good enough and people do not stuck with it long enough to integrate it into their daily or weekly money management.

So how do you start a budget? The steps are fairly simple and the outline that follows will highlight some of the considerations to take note on. One of the most important things to remember is that no one system will work for every individual. It may take some experimenting to get it right but keep working on it.

Steps for Starting a Budget

Track All Your Expenses
You need to figure out where your money is going each day to truly get a handle on your cash flow. For at least one month, carry a small notebook with you and write down every single cent you spend, whether it be your entire grocery receipt total or the bottle of water you bought on the way home from work. Track all ATM withdrawals and credit card purchases. It all adds us and by knowing exactly where your monthly spending is going, you’ll know how to build a better budget.

List All of Your Expenses
Once you have a handle on what is going out randomly, you’ll need to gather every one of your bills and make a list of what you owe to whom and when the bill is due. You should also note the current balance due on each account just so you know where you stand and how much farther you have to go.

Categorize It All
You’ll now need to combine both lists into one and categorize them in different ways. Start by labeling each expense by type such as groceries, entertainment/dining out, car, utilities, etc. There may be a few random items that can be considered miscellaneous. On a new piece of paper, rewrite the list according to the categories and total for the month.

Discover Your Income
Surprisingly, there are some people who have no idea how much money they really bring home each week. This step will help you tally all of the income you receive regularly including your salary, commission, bonuses, child support, public assistance, etc. making sure you have counted everything, then total it all up for one month.

Do The Math
Next, take your income and subtract your expenses for the month. Are your left with a negative number or a positive one? If you have a positive number, great! You have a bit of room to be flexible but the budget will help you see where you can save some money and help you understand how to invest your left over cash better for a more secure financial future. If the number is negative, you either need to cut your spending or make more money. Whatever the number is, move to the next step.

Start Budgeting
One a third sheet of paper start listing your financial obligations, starting with the expenses you have at the first of the month and in an order of priority. For instance, if your mortgage payment is due on the first of the month, list it first, followed by all other important expenses by category – meaning you won’t put your $500 total for entertainment before your car note. When you have your basic outline of expenses covered but they exceed your income, move to the next step.

Start Making Cuts
Your next step will be to review all of your categories and see where you are spending too much money than start making cuts. If your category for entertainment a month costs $500 total, start slashing items from your original expense tracking list you started with. Look for excessive costs such as dining out too often, buying convenience foods, or other spending that isn’t necessary for basic survival. Keep cutting until your income exceeds your expenses. Your goal is to spend less than you earn.

Remain Flexible
There will always be expenses that are unexpected that will pop up from time to time. By following a budget consistently, you should know how to make it work each month. As your income increases over time, make allowances to add more to your savings accounts and retirement funds. You want to and should know where all of your cash is going at all times. A budget will help you do this.