Creating a Budget in 4 Simple Steps
Cash, moolah, dinero, money. Whatever you call it, one thing is for sure: it takes hard work to come by and it’s sure easy to spend.
That’s where a budget comes in!
Having a budget will help you to spend your money on the things you really, want— like a vacation, a new car or just plain old peace of mind vs. where you don’t want it to go (like credit card companies, banks, or bill collectors).
Trust me— creating a budget is quick, easy and you won’t get hurt. Plus, it will save you money!
Use our budgeting worksheet as you follow the four simple steps to create your budget. Let’s get this started!
Step 1 – Tally Your Income
First, you need to tally your income. How much money do you bring in every month? This should include all your sources of income after taxes.
Step 2 – Make a List of Your Expenses
Make a list of all the things you have to pay for and what they cost. This should include your housing expense, car payment, utilities, gas, groceries and a few extra dollars in case of an emergency. (For more information on saving for an emergency, read Building an Emergency Fund.)
A good starting point is to review your checking account and credit card statements and assign purchases to “need” categories (like housing, utilities, gas) and “want” categories (like feeding your coffee addiction or going out for lunch). Total your “need” categories to get you mandatory expenses.
Step 3 – Calculate Your Spending Money
Take your total take-home pay (from Step 1) and subtract your mandatory monthly expenses (from Step 2). The number remaining is your “spending money”— it’s what you have to save, spend, or do with as you’d like.
If your “spending money” is a negative number, you’ll have to make some changes before we can put together a solid budget. These changes may mean:
Step 4 – Create a Roadmap for Your Money
Now, you can take a look at your “spending money” and decide on where you want to spend it.
Whatever your goal, this “spending money” is your starting point to getting there.
Keeping a budget isn’t a one time thing. Like working out, getting in good financial shape takes commitment. There are several types of financial fitness equipment that can help your stay on track.
And, there you have it. All you need to know about creating a budget in four simple steps. If you have any more questions or need more information, please visit the Life. Money. You. section on our website, www.bcu.org.