Thirfty Living Tips - I Need Help Making a Budget

The first step in living a debt-free life is making a budget that you can live with. Most people don’t have too much trouble making out a budget - it’s living within a budget they have trouble with. In this article we will address how to make a budget.

To make yourself a budget, set the time frame you want to budget for; a month, a year, etc. Usually people try to set a budget for a year. You could set up a budget for six months and then revisit it. If it is still working, continue with the same budget, if it is not working, rework it.In this example we will look at income and expenses for a month and then budget the year based on the monthly figures.

Begin by writing down all of your income and expenses. In order to be accurate on your figures, get out your last two months bank statements or be near your last two months bills. You could do it like we have in the following example.

Note: this can be done on a spreadsheet, or if you are using accounting software, many accounting software programs have a built in budgeting chart.

The first list is for income and the last are expenses.

This is just an example:

INCOME: Write the name of the company you get income from - Amount - $4,500.00
EXPENSES: Write the names of the companies you pay such as the Utility Company - Amount $95.00, Phone Company - Amount - $55.00

Once you have all your income and expenses listed for a month, add the two columns. Put your totals at the bottom.

Now since you are making this budget for a year, multiply each column by 12. This should be your annual budget except you will need to add in money for food, medical, dental, vehicle repair, insurance payments if they are not monthly (if they are monthly they should already be on your list).

You may also want to add an amount for clothing and gifts (including Christmas, birthdays, anniversaries, etc).

Let’s say you came up with the following monthly totals:

INCOME: $4,500.00
EXPENSES: $3,200.00

Multiplied by 12 gives you:

INCOME: $54,000.00
EXPENSES: $38,400.00

Then you added in $500.00/month ($6,000.00 per year) for food, $1,000.00 per year in medical, $500.00 per year in dental, $1,000.00 per year in vehicle repair, $1,500.00 per year in gifts and $1,000.00 per year for incidentals (lawn care, garden supplies, school supplies, household repair, etc).

Your total income (in this example) is $54,000.00. Your total annual expenses are $49,400.00. This leaves only $4,600.00 annually that is not budgeted.

Put this amount in your budget every month and flag it for savings or your retirement account. The best thing to do with this extra money is to put part of it in a savings account and the rest in an investment account. That way if you face an emergency like a broken water heater, an unexpected vehicle repair, etc, you have a liquid account to get the funds from.

Now that you have your budget, don't miss our next article, I Need Help Sticking To My Budget.