How to Budget Your Finances

Careful budgeting will keep your finances in order.

Credit cards, debit cards, online banking and automatic bill payment all provide convenience for everyday spending -- they virtually eliminate the need for carrying cash and writing checks. However, these convenience tools create more steps to maintain a budget. You also may forget about impulse purchases and monthly bills until you realize that you don't have enough money left over at the end of the month. Fortunately, simple steps can help you budget your finances to make sure you don't spend more than you earn.

Difficulty:

Moderate

Instructions

1. Enter all your monthly expenses on a spreadsheet. Include all recurring payments such as mortgage, utility, credit card and installment loan payments.

2. List your income in a separate column in your spreadsheet. Include all sources of income, such as your wages, your spouse or partner's wages, income from side jobs or entrepreneurial endeavors, alimony and child support payments and investment income.

3. Subtract your monthly expenses from your total income. The remainder represents the amount left over for groceries, entertainment, restaurant meals, paying down debt and investments. Enter this total in a third column on your spreadsheet.

4. Subtract the amounts you want to apply to debt, savings and investments from the total left over after monthly expenses. Enter this amount at the top of a fourth column in your spreadsheet.

5. Keep all receipts for everyday purchases. Subtract the amounts of each purchase from the amount at the top of the fourth column. Documenting your purchases can help curb unnecessary spending, remind you of how much you have left for discretionary spending for the month and simplify keeping track of debit and credit card purchases.

Tips & Warnings

• Purchase a personal finance software package if you cannot keep track of your finances with a spreadsheet. Personal finance software can automatically pull information from online bank accounts to simplify managing your budget.

• Withdraw cash at an ATM or through your bank for discretionary spending. This reduces your need for keeping receipts by physically limiting how much you can spend. When the cash is gone, you know you have no more left for discretionary spending for the month.

References

• "The Everything Personal Finance Book"; Peter J. Sander; 2003
• "How to Manage Your Money"; Larry Burkett; 2002

Resources

• Read this Article in Spanish