Thursday, February 5, 2009

Making a Budget and Sticking To It: Part 3

Here are some simple steps to the actual making of your budget.

Make Your Budget

After you keep track of your expenses and income for a few months, you're ready to create a budget. Your goals in making a budget are to:

  • control your impulses to overspend, and
  • start saving money.

To create your budget, follow these steps:

  1. Determine the categories into which your expenses fall (see the chart below for suggested categories.) List your categories of expenses down the left side of a piece of paper (or Excel spreadsheet). Use as many sheets as you need to list all categories. These are your budget sheets.
  2. On the sheets containing your list of categories, make 13 columns. Label the first one "projected" and the remaining 12 with the months of the year. Unless today is the first of the month, start with next month.
  3. Using your total actual expenses for the two months you tracked and the other expenses you added, project your monthly expenses for the categories you've listed. (Make a note of when smaller expenses, such as magazine subscriptions, are due so you can adjust your budget for that month. These temporary adjustments make more sense than trying to save $1.23 each month to cover an annual magazine subscription.
  4. Enter your projected monthly expenses into the "projected" column of your budget sheets.
  5. Add up all projected monthly expenses and enter the total into a "Total Expenses" category at the bottom of the projected column.
  6. Enter your projected monthly income below your total projected expenses.
  7. Figure out the difference.
Coming in Part 4: Decreasing your expenses

To see other parts of this series:
Making a Budget and Sticking To It: Part 1
Making a Budget and Sticking To It: Part 2
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