How to Create A Budget

How Can You Go From Overspending $1,000. Each Month
To Paying Off Your Debt Instead?

With a little planning...

It's not much different than my mother's apple pie.

How is that?

Well, in my opinion, my mother makes the world's best apple pies!

I have yet to taste one that I did not throughly enjoy. My mom lives in northern Massachusetts. She will typically bake several apple pies in the fall when there is an abundance of apples.

What's the first thing she does?

Now, here's the secret to how she makes the best pie ever again and again. She "follows" her recipe. If she didn't and left out the sugar, or cinnamon, it just would not taste the same.

Getting out of debt and building wealth is no different.

What kind of plan should I have?

A Budget...

You may or may cringe when you even think about a budget right now, but you will change your mind when you see actual results. If you're like most people, you probably don't want anything to do with a budget. I didn't either but not having a plan is how I got into to trouble in the first place. To see and measure actual results.

The sole purpose of a budget or spending plan is to provide a reasonable way to manage your money before you spend it. You tell your money where its spent. Give each dollar a job. Making your money work for you. So you never have to wonder where it all went.

I Don't Have Time for This!

If you have any income, whether it's $25,000. or $250,000. a year, you need a budget. You and your husband work hard and spend hours to earn money. Take responsibility for your money.

As long as you have "a plan" that you can and will use.

It's how I got out of debt. It's how you can too!

How to Create a Budget

First, if you have not already done so, evaluate where your current finances are by completing a Personal Financial Statement .

Did you find any surprises?

Is it where you what to be?

Can you see where you need to correct any imbalances or make any necessary adjustments?

If it is better than you thought, congratulations! If not, don't worry. Even if your up to you eyeballs in debt, or just want to improve your current situation, you can make the changes necessary to get you where you want to go.

And nothing will get you there faster than with a plan to provide direction. Plugging the holes that your money leaks from. Getting you to your ultimate destination much faster.

A Budget or Spending Plan

But before you can create a budget, you need to know how you are currently spending your money.

If you keep very detailed records already, you job will be easier. But don't worry if you don't have detailed records. You can start now by tracking everything you spend for the next 30 days.

Here's a Cash Flow Worksheet that you can use to help you get started.

When you receive any income, write it down. When you're paying your bills, write every bill down. Include the amount, and what it was for. When you go out, take a piece of paper with you. Write every purchase you make. The amount and what it was for.

At the end of the day or week, sort your income, purchases, and bills into different categories. Add up each week at the end of the month. Now you should have a better picture of where you money is going and what your needs are.

Keep in mind that the more information you have, the more accurate and therefore more effective your budget will be.

Here's and example of the different categories you might have:

Income:

• Main Source of Income (after taxes)
• Interest
• Additional Income

Expenses:

Giving

• Church and/or charities
• gifts

• 401K Plan
• IRAs
• Investments
• Savings Accounts
• Contingency Account

Housing

• Mortgage or Rent
• Home Owners or Renters Insurance
• Maintenance (Include Home Association Fees)

Utilities

• Electric
• Gas
• Water
• Phone
• Cell Phone
• Cable
• Internet
• Trash
• Other

Food

• Groceries
• Eating Out

Personal

• Health Insurance
• Life Insurance
• Dental Insurance
• Medical & Dental Expenses including prescriptions and vitamins
• Toiletries if not included in groceries
• Clothing
• Haircuts
• Dry Cleaning
• Pets Care
• Have Fun
• Children’s Care, Sports, and Activities
• Vacation

Car

• Gas
• Maintenance and repairs
• Insurance

Debt

• Car Loans
• Student Loans
• Credit Cards
• Other Loans or Debt

Total Expenses

Summary:

Net Income
Less Total Expenses
-------------------
Surplus or Deficit

Now that you know where you are spending your money, you can see what if any adjustments you need to make. If you have a deficit, you have two choices. You will need to reduce your expenses or increase your income or a combination of both. I recommend a combination of both.

For variable bills, like your electric or gas bill, use a 12 month average. If you have money left over this month, save that amount until you need it later on in the year.

Warning: Expect the Unexpected

The semi-annual insurance payment. Inflation. A leaky roof. Your car gets old and needs to be replaced. Breaking your budget. Potentially putting you further in debt.

To prevent these events from becoming financial nightmares, include them in your budget from the beginning. Use a dollar amount or a percentage. Personally I allow about 10% for contingencies. Be realistic.

What is the Best Way to Keep Track of Your Budget?

There are several very good options. The very "best method" is the one you actual "use" and feel comfortable with.

The first option is to keep track of your budget is in a notebook or purchase a budget workbook from either a discount or an office supplies store. This is an inexpensive and easy option for someone who doesn't like to want to keep their finances on their computer. or use their computer that much.

When you receive income, allocate the budgeted amount into each category. When you pay your bill or spend any money, take that amount out of each category. When you run out of money, you stop spending in that area or adjust another.

Budgeting Software

If your looking for a software program that is already set up for you, you should consider YNAB.

YNAB is a desktop based system. It does exactly what it needs to do. It will help you stop living from paycheck to paycheck, give every dollar a job, prepare for the ups and downs, and help you roll with the unexpected.

You can monitor your spending category balances throughout the month. Download transactions from your bank and import them into YNAB. Adjust next months budget in minutes.

So, if your looking for a software program that is already set up for you, you should consider YNAB.

Click Here to find out more.

Using the “Envelope” System Without Having to Use Cash

For a lot of people, this has worked very well. It can work well for you if you don't mind working with cash. I used it when I first started budgeting. But using cash is not necessarily safe. Or convenient. It doesn't work well if you are now using online bill-pay.

Then I found Mvelopes. An online envelope budgeting system.

It's user friendly and easy to set up.

Connects all your accounts, bank and credit cards, together securely. Set up an envelope for each expense. Making online bill-pay even easy to use. At the end of the month, you can clearly see if you have overspent or saved money, helping you to stop living beyond your means.

This system costs just pennies per day.

You can even try it out for Free for 30 days. Test it for yourself and find out why this system has been proven to work for many moms and families.

I encourage you to give it a try. You have nothing to lose.

You will receive as a bonus:

The ebook, Make Your Words Sell!
Effective writing on the net! MYWS! shows you how to use words to get your Most Wanted Response from your visitors.

Plus, you'll also receive a copy of the WAHM-IT!, The Masters Course

The perfect solution for Work-at-Home Moms (WAHMs)...

Be there for your kids and build a real business, doing something you love.

Custom Search

Leaving How to Create a Budget Returning to Deft Free Solutions