How to Finally Make a Budget in 3 Simple Steps

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Nothing in life is free, so managing our money is an important factor of any individual’s life. People have jobs and careers that provide them with an income; an income that in turn allows them to provide for themselves and their families. Every person has things they need to survive, and things they want to have to enjoy life to different levels. Not everyone is lucky enough to have an income that provides for all their wants and needs. This doesn’t mean people have to go without some of the finer extras.

Setting up a budget is the best way to ensure that an income stretches far enough to cover expenses and extras we all have in our lives. With a budget there is a clear picture each month of how much money is coming in. It is then possible to list necessary expenses to which income must be devoted first. If there is money left over, extras can be put into the budget to judge how they will affect the balance between income and budget in the future.

For many, creating a budget might seem like an annoying and dull task. But making a budget doesn’t have to be dull, boring, or even time consuming. Anyone can create a workable budget in a matter of minutes that can easily be used to track income, control expenses, and manage extra funds. The following represent three easy steps to finally creating a budget that can keep anyone’s finances on track.

Step One The first place to start should always be in determining income. It is very important in this first step to be honest with yourself. Do not look at the gross pay you receive, whether you are paid hourly or on salary. Your gross pay never ends up in your pocket in total, so you don’t have all that money to spend. Once you receive a paycheck, go right to the “net income” listing and enter that amount as your starting point. In order to track your income set up a simple chart of income and expenses. It doesn’t matter if you use pen and paper, computer software, or a smartphone app; just make sure you are actively tracking your money. Once you determine your accounting tools, enter your net income as a starting point.

Step Two

This step could take some time, but there is nothing wrong with that. Spend time, as long as a month, tracking how you spend your money. The best way to track your expenses is to hold onto receipts from your purchases during the given time period. Once you’ve accomplished this, you are ready for the next portion of step two.

There are five basic expense groups that should be included on your budget. These groups should look like this:

– Food: groceries and other food necessities

– Transportation: gas, parking expenses, or public transportation expenses
– Entertainment: dining out, movies, concerts, sporting events, etc.
– Clothing and gifts: clothes, shoes, and gifts for birthdays and other events
– Miscellaneous: allowances for children, special purchases, vacations Enter your receipts into each of the appropriate fields to get an idea of what your current expenses are for each field. Some items might be appropriate for multiple fields, so just use common sense and be honest. Lunch with co-workers is justifiable under food, but a dinner date with your spouse is more entertainment than a food expense. This difference will come in handy in the final step.

Trim the Fat

Now that you have your expenses stacked up next to your income it is time to add up the damage and see where you stand. Obviously, the goal is to have your income exceed your expenses. If you find that you have a nice surplus your goal is simplified, stick to your current spending habits and don’t let them increase until your income increases to match.

If you find yourself in the red, with expenses exceeding income than it is time to cut back. The first place to cut back is going to be in entertainment, miscellaneous, and clothing and gifts. If you spend $150 each month on a high-end cable TV package but only spend a few hours a week watching, you are wasting money. Make the easy cuts first and see where that gets you. After that cuts become more difficult and the choices become personal. Only you can decide what you can live without.

Making a budget for your finances doesn’t have to be difficult or even time consuming. A simple comparison of your income and expenses will show you your current financial health. From there it is all about living up to that current budget, or altering your lifestyle to fit your new reality.

Guest post contributed by Carla Gregson for – looking to play bingo? Visit their website. Carla is a freelance writer. She enjoys finding interesting ways to be thrifty. Her articles appear on various lifestyle blogs.