Creating a budget

Tracking your income and expenses

Budgets are not just something that only billion-dollar companies need to set. Everyone – no matter how much money they earn – should have an established budget to help them make sure that they don’t spend more money than they make on a monthly basis.

Establishing a budget is something that can be done by anyone, even if the words “balancing a checkbook” sound like a foreign language. You don’t need expensive software to set a budget and track your money. All you need is a pen, some paper and the commitment to stick with it.

Step 1 – List your income and expenses

Income – This should be easy because most of us only have one job and one source of income. You need to list exactly how much money you bring home every month, not just what you make a year divided by 12. To set an accurate budget, you need to know how much money you have in your bank account after taxes.

Expenses – This will be a little tougher because it involves looking at everything you spend money on each month, even guilty pleasures. This includes estimating your Starbucks habit, even if it is only $4 a week. Here are some other normal expenses that you need to list:

• Rent • Utilities • Water • Phone • Tobacco/alcohol • Car payment • Gas • Cell phone • Entertainment

• Insurance • Natural Gas • TV (cable or satellite dish) • Groceries/eating out • Clothes • Loan payment (student, others) • Internet • Credit card payments

Step 2 – Do the math
In one column, total your monthly income. In another column, add up all of your expenditures and then do the math. If you make more money than you spend, give yourself a pat on the back. If, however, you are like many of us who tend to spend more than we make, proceed to Step 3.

Step 3 – Trim the fat
Balancing your budget involves deciding what you can do without, or at least with less of. The bigger the difference in your income and your expenses, the more you will have to cut. Don’t try to cut it all in one place, though. Cutting some here and there will help you get to your desired budget.