How to Prepare a Budget Using Historical Data

Looking at the history of expenditures is easier with a software program.

The best way to prepare an accurate budget is by using historical data that tells how much you've spent on a given item in the past. Budget software programs make this easy, because if you've made payments out of a checking account to a specific payee --- such as City Electric --- you can enter that name under the category of "utilities: electric" and the software will convert every entry under that name to that category. That tells you how much you've spent, and are therefore likely to spend, on each category.

Instructions

1. Collect historical data. This can be done by collecting old bills, receipts, canceled checks, credit card statements and other proof of money spent. Once you have collected them, make note of how much you spent on regular categories each month or year. A simpler way is to install budgeting software which will, once you've set it up, recognize each item and create categories and even graphs, depending on the software, of how much you spent on each item.

2. Look at how much you spent on each category. Identify whether you spent more on certain categories at different times of the year; for example, whether the gas bill went up in the winter. Average the total cost for the year over 12 months in order to create a predictable budget.

3. Create a budget with the numbers you came up with, listing each budget item and how much it is likely to cost per month. If you need to shrink the budget, look for areas where you can cut back and estimate how much you can cut to make your budget fit your needs.

References

• CNN Money: Money 101: Making a Budget: Listing Expenses