How to Develop A Personal Financial Budget For Yourself

If you ever find yourself short of funds just before payday or discover you are overdrawn on your checking account, you need to create a simple budget for yourself. When you examine your expenditures and create a simple budget, you take the guesswork out of where your money goes. Rather than spending blindly, you make conscious decisions about purchases. You may even discover that you have money left over when you pay closer attention to your spending habits.

Things You'll Need

• Ledger or notebook paper
• Calculator
• Pocket-size notepad
• Pen

Instructions

1. Make a list of all your regular monthly expenses. These are the expenses you usually write checks or make electronic payments for monthly. Most people have mortgage or rent payments, utilities, transportation expenses, cable and Internet service expenses and phone bills. If you have expenses you pay quarterly or annually, such as insurance, use an estimated monthly amount. Designate 3 percent or 5 percent of your income as a savings amount. List these "fixed" expenses in a ledger or on a sheet of notebook paper.

2. Record your monthly income in the ledger. Subtract the fixed expenses from the previous step from your monthly income to arrive at a discretionary figure. This is the amount you have left over for all the living expenses over which you have a great amount of control, including groceries, entertainment, eating out, clothing and gifts. Your goal is to spend no more than this total on these items during the coming month.

3. Record all your discretionary expenses over the next 30 days in a pocket-sized notepad you carry with you everywhere you go. Don't leave anything out. Even the smallest purchase should be recorded.

4. At the end of the 30 days, compare the totals in your pocket notepad to the discretionary income figure you started with. You may be surprised on how much you spent on eating out, movie rentals, manicures or snacks at the vending machine at work.

5. Make separate columns in your ledger for each discretionary spending category so you can view and analyze each specific area. Record the figures from your pocket notebook. Add them up and arrive at the total you spent on groceries, entertainment, eating out and all the other categories you set up.

6. Find places you can cut back on spending in the coming month. Take lunch from home once a week, clip and use grocery coupons or be more conscious of your travel in the car.

7. Based on what you know now, develop your new budget for the next 30 days. Write out your discretionary expense categories in your ledger. Assign a figure for the month or week to live on and try not to exceed it in each category. Continue to record your expenses in the notebook. At the end of 30 days on your new budget, see how well you did and keep tweaking category amounts as you go along.

8. Emergencies can throw off any budget, but if you are successful with your new budget, you should have some excess money to put aside each month, in addition to the savings you built into your "fixed" expenses.

Tips & Warnings

• When you analyze your past spending and create your new budget, don't deprive yourself from leading the life you want. Just be wise about your spending decisions.

References

• The Simple Dollar: Making A Simple Budget - A First Timer's Guide