5 Steps to Making a Successful Budget

Making a monthly budget will help you take control of your income and expenses. It’s simple addition and subtraction so if you have no knowledge of accounting don’t worry, this is very easy and it’s the first step to taking control of your finance.

Step 1: Gather all your bills and income statement:

This includes bank statements (checking and saving accounts), recent utility bills,   and information relating to your income or expenses. 

Step 2: List (add up) all your source of income:

It would be easy to do this on a spread-sheet, however, if you don’t know how to             use excel, that’s OK, it can be done on a sheet of paper.  If you are self-employed or have any other source of income you should record these also. Add all pay-check received for the month as one, and record the total.

Step 3: List your monthly expenses:

Make a list of all your expected expenses and what you plan on spending over the course of the month.  List the fix expenses, which include rent or mortgage payment, insurance (life, auto, or health) groceries, entertainment, utilities, loans, and basically everything you spend money on.

Step 4: List expenses into two groups:

List expenses into groups of fixed and variable expenses;

Fixed expenses are payments that stay the same each month and are necessary to your way of living.  For example your car payments, auto insurance, rent or mortgage and credit cards payments, you get the idea.

Variable expenses are the ones that will change from month to month, this includes groceries, eating out, gassing up your vehicle and entertainment.

Step 5: Total up your monthly income and expenses:

If your income is more than your expenses you are off to a good start, this mean you have excess funds, which you can now put into saving, or into an emergency fund account. 

Now if your expenses total more than your income, it means you are going to have to make some changes that would cut back on your spending habits. 

If necessary adjust your expenses.  If you are in a situation where your expenses are higher than your income, look at your variable expenses and find areas to cut. 

You can also look at your fixed expenses in areas such as cable, auto insurance and any other that you may be able to get a lower rate or payment on.

Stay on Tract:

Review your budget monthly because it is important to stay on track.  After the first month take a look at your actual expenses versus what you had created in the budget.  Take some time to record what you do with your money on a day-to-day basis this will help you evaluate your financial status at the end of the month.  Try not to go over your budget.