How To Create A Budget
When you learn how to create a budget, you are taking the first steps towards financial stability. The importance of learning how to create a budget cannot be overstated as a budget can be a very powerful tool in your personal finance planning. Once you learn how to create a budget, you can start to plan on paying off your debt and saving money. You can learn how to create a budget using a computer program, or you can use a pen and paper. So long as you are taking the steps to plan your financial future, it does not matter how you get the job done.
To create a budget you will need:
- Spreadsheet software
- Graph paper
- Gather your bills together. In order to create your personal budget, you need to set aside space in your home to organize your financial papers. Get a bill organizer and put your monthly bills in it so that you can keep track of them. If you are like most people, you tend to forget to pay bills until the payment is late. When you learn how to create a budget and start organizing your bills, you will find that you will be able to pay your bills on time. Paying your bills on time not only reduces late fees and penalties you would have to pay, it also improves your credit score and will help you to get loans for cars and homes in the future.
- Create a budget spreadsheet. The best way to organize your bills is to have them listed on a budget spreadsheet. Mark down every bill you have and include important information such as payment due date, monthly minimum payment and total amount due on the account. Organize your bills by due date so that you pay them on time. You may also want to create a secondary list that prioritizes your credit card and installment loan debt in the order that you would like to pay them off. This will help you determine where extra money will go each month.
- Create a list of expenses. Your expenses are things like groceries, gas for the car, monthly entertainment money and money that goes into savings. Always try to put at least five percent of your monthly income into a savings account for the proverbial rainy day. Savings also means saving for things like vacations and holiday spending. The best way to create a list of expenses is to monitor your spending for one month by keeping a spending log. That log becomes the line items for the monthly expenses in your budget. Writing out your expenses also allows you to see how you spend your money each month and determine if you need to make any changes. For example, do you really need to spend $5 every morning for a coffee on the way to work? If you bring your own coffee, then you just saved yourself about $100 a month. That is one of the powers of a budget; it helps you to organize your spending and make cuts that can save you money.
- Add in your monthly income. With the monthly spending accounted for, you now need to put your monthly income into your budget. Make a note of when you get paid and which bills need to come out of each check. This is where a budget can get tricky, so be careful. Make sure you plan your spending wisely so that each bill and expense is covered.
- Revise it each month. Each month will be different in terms of bills and income. Some months you may get paid an extra paycheck because of the way your pay schedule works out. There are one-time bills that you sometimes have to deal with such as doctor bills that need to get put into your budget. Analyze the budget for the coming month and make sure it is accurate before the month begins.