How to Create a Budget

Getting organized with your finances is the first step to getting ahead, but you may not be sure how to create a solid budget. Follow these steps to learn how to create an efficient, well structured budget so that you can begin making smart financial decisions today and start being more prepared for tomorrow.

Instructions

Difficulty: Moderate

1. Keep track of all of your expenses for 1 month, including everything from monthly bills to your daily cup of coffee. Save your receipts, and log each expense by date either on a spreadsheet, a text document or a notebook.
2. Separate all of the above expenses into two categories: fixed expenses (bills that you have to pay each month) and variable expenses (recreational spending).
3. Subtract your fixed monthly expenses from your monthly take home pay to determine your disposable pay, or the amount of money you have left over for savings, debt payments and variable expenses after you've paid your fixed monthly expenses.
4. Decide how much money out of your disposable pay that you'd like to allot to savings, debt payments and variable expenses, and set up a plan to have those amounts disbursed accordingly. You can do this manually by setting up online payments and transfers each month or you can set up automatic online payments and transfers. Talk with a representative from your bank to help you set up the payments if you prefer.
5. Use a spreadsheet program to create a monthly payment timeline of all of your fixed expenses. Check off your expenses as you pay them throughout the month.

Tips & Warnings

• Save at least 10 percent of your pre-tax income if possible.
• It is always smart to keep a small savings for emergencies that may arise.
• Keep in mind that paying off debt, such as high-interest credit cards, should be a main priority when splitting up your disposable pay.