How to Budget Your Monthly Income

Creating a budget helps identify places to save money.

Skillfully budgeting your monthly income provides peace of mind that people without financial control never enjoy. During a night out with friends, you’ll be able to easily assess your ability to spend money freely, while others are running to the ATM to figure out their cash situation. High overdraft fees become a thing of the past and savings accounts begin to grow. Here are some easy steps to creating and maintaining a budget.

Things You'll Need

• Paper or spreadsheet Direct deposit

Instructions

1. 

   Track every expense for a few weeks.

   Track your expenses for several weeks. Although writing out every penny can be frustrating, tracking your spending closely helps you see how every dollar is spent and makes you aware of trends. This will give you realistic numbers for your budget.

2. 

   List all your expenses.

   List your expenses. List bills that are paid at consistent times, such as weekly, monthly or quarterly. These would be items such as the mortgage or rent, electric, cable, or phone bill. Second, write in a separate column necessary frequent expenses, such as groceries and gasoline. Find a reasonable monthly number for these costs. Third, list variable expenses that pop up infrequently, such as birthdays, holidays, car and home repairs, and vacations.

3. 

   Examine your expense list for cost-cutting opportunities.

   Review expenses and look for opportunities. Could you cut the cell phone bill? Maybe carpooling to work would save money. Maybe you don’t need cable television. Would the utility company budget plan save money? Comb each line item to find ways to save.

4. 

   Build a rainy day fund for unexpected future expenses.

   Create a savings goal. A good budget demands that you save money for those months when you won’t have income. Also, large expenses such as holidays and automobiles will require more money than you may have available in a month. List large goals and the time frame in which you wish to accomplish them; then divide by the number of months to the goal. This amount should be added to your budget for your rainy day fund.

5. 

   Direct deposit keeps money out of your hands.

   Use direct deposit. Money in your hand is quickly spent. By using automatic methods, your money will go into the correct accounts to keep your budget running smoothly. Watch out for ATM card use, also. Money deposited on Friday comes out quickly if funds are quickly available.

6. 

   Schedule time to pay bills systematically each month.

   Pay bills systematically. Release enough each week to pay listed bills from your budget. By paying bills at set periods rather than as they come in, you’ll better grasp cash flow throughout the month.

7. 

   Set aside an allowance for movies or other fun activities.

   Give yourself an allowance. Budgeting every dollar begins as fun but quickly becomes tiring. Instead, ration a weekly or monthly amount that you won’t budget and is meant to be spent on fun. You may also use this money for gasoline expenses or other frequent, consistent costs.

References

• Always Frugal: Budgeting to Live Within Your Means
• The Total Money Makeover; Dave Ramsey; 2007
• Debt Steps: Tips For Living On A Budget