How to Make a Personal Finance Budget

Many people have trouble keeping track of their money each month. This article tells you how to make a simple budget in order to keep their finances

Things You'll Need

• Income
• Bills
• Pen
• Paper
• Spreadsheets

Instructions

1. First of all you should either draw out a grid or open a spreadsheet program on your computer. If you are more comfortable working with drawing a grid, then you will need a left hand column for cost types, and subtitles over the top to the right for months. Some people also prefer to draw their grids once they have all their expenses listed.

2. Next of all collect a few pay stubs and calculate your average monthly income. This can be done either for yourself, or for a household, which would include your partners income as well. The most accurate way to calculate the average of your income is to add all of the pay amounts together and then divide them by the number of pay checks you added. For example:

   $2000+$2500+$2300+$1900=$8700 /4(number of months)=$2175 average monthly income.

   Make a note of your findings for each bill.

3. Do the same but this time instead of using pay stubs use monthly bills which relate to your property. These are things such as rent, property taxes, mortgage payments, heating, electricity, sewage, garbage and water. For yearly payments simply take the figure you pay and divide it by 12 for what you need to put away each month, and then write down each payment you have calculated.

4. Next add all of the other bills you have which are related to driving, which will usually be fuel, insurance, vehicle payments and maintenance. Again if possible take several months worth of payments and make an average for each bill. This wont always be possible for all costs such as fuel, so you might have to estimate for costs you don't have receipts for. Again write down the findings.

5. Then repeat the process except this time use all the costs you have which are related to living. These will be things such as entertainment, cable, internet, phone, clothing, education, food, medical costs and anything else which fits into this category.

6. If there are any areas where you notice you are overspending, then you should attempt to lower the amount of outgoing money that you are spending each month. For example a large cable package if you only watch a couple of channels. Also if you have any payments which are taking longer to pay off then you want, then you can pay more each month in order to pay them off faster. This is particularly useful if you are paying off something that has a high interest rate such as a credit card bill.

7. Having broken down all of your expenses and costs, you should now be able to work out a budget by adding up all the costs you have to cover in a single month. This is the amount of money you should put in the bank every month in order to cover your expenses. The rest of your income can then either be spend or saved. Of course don't spend all of your extra money each month, as your costs can increase unexpectedly.

8. Each month look at your budget again, and make changes and modifications it are needed. Eventually some things will change, and can then be removed or added to your budget. For example you might finish paying off a credit card bill or appliance, which will leave you with a lot of extra month each month.

Tips & Warnings

• Always add a little extra if you can to cover bills in case you have an anomalously high bill. For example if you went through a cold snap and use the heating system a lot more than usual in one month.