How to Make a Sample Budget Plan

Making a budget can help keep you on track financially

The first step in saving money and being fiscally responsible is to budget your income and expenses so that you know where every dollar goes. There are several ways to set up a personal financial budget, from using pencil and paper to setting up a computerized spreadsheet to using a specialty software program. Regardless of which method you use, the basic steps of creating a budget plan are the same.

Things You'll Need

• Computer (optional)
• Spreadsheet or budget software (optional)
• Manual journal with columns (optional)
• Bank statements

Instructions

1. Analyze your current spending. To find out where your money goes now, review your bank statements for the past three months. Beside each entry, write in a category. For example, the $57 spent at Kroger last week might be groceries. Once completed, make a list of the categories you listed in the approximate order of how many transactions fell into each category. Transactions that are infrequent or unusual can fall into the category "Miscellaneous."

2. Set up income and expense categories based on where your money goes now. Start your sample budget plan by putting each category identified in the Step 1 on a line in the plan. List the months of the year in column headings across the top of the document. If you are using software, enter budget categories or modify the existing ones in the template. Leave blank rows in case you have new common expenses in the future for which you want to set up a new category. At the end of every row and the bottom of every column, leave a space to subtotal the entries.

3. Project your monthly spending in each category. Based on your prior spending habits and on new habits you want to incorporate, enter how much you plan to spend on each category every month. Estimate your take-home income and enter it. If you are paid biweekly, remember that two months of every year will have three pay dates and, once every 11 years, three months will have three pay dates.

4. Calculate your monthly surplus or deficit. At the bottom of each monthly column, subtract all of the projected expenses from the projected income. If the difference is positive, you have a surplus for the month; meaning you have money that you can carry over to the next month. If it is negative, it is a deficit and your expenses exceed your income. You will either have to reduce your budgeted expenses, increase your budgeted income, or have enough of a cumulative surplus from prior months to cover the shortfall.

Tips & Warnings

• At the end of the year, compare your actual spending to your budget to see how well you stayed on budget.

• Keep your budget up to date when your financial situation changes or it will become useless. Change your projections based on updated information so that you know what your true spending will look like in the upcoming months.

References

• Money and Business: How to Make a Budget Plan