How To Make a Budget

by Pam on April 6, 2009

The first thing you need to do if you want to make a budget is to gather all of your monthly bills together and sit down at the table and compare your income to your expenses.  The ultimate goal for making a budget is to ensure that you are spending less than you are earning.  If you are already at that point, that is great.  If not, don’t worry, that is why you are making a budget. 

 To get you started, I have included some expenses that you may incur in your household:


  • Mortgage or Rent
  • Electricity
  • Gas
  • Water & Sewer
  • Phone
  • Internet
  • Cable TV
  • Household Maintenance
  • House, Life & Health Insurance
  • Vehicle payment
  • Bus fare
  • Fuel
  • Vehicle Maintenance
  • Vehicle Insurance
  • Groceries
  • Eating Out
  • Pet Food & Care
  • Medical Expenses
  • Clothing
  • Gym Fees
  • Entertainment
  • Loan Payments
  • Gifts & Donations
  • Investments

Once you have made a list of all your expenses and compared it to your monthly income, your next step is to determine how much you want to spend for each category.  For example, you could say that you will only allow yourself to spend $200.00 on entertainment each month, $150.00 for fuel, etc.  Make sure that your projections are realistic and attainable.  And make sure your expenses are less than your income! If your current expenses are greater than your income, you need to determine what your needs are versus your wants.  Trim down your expenses by getting rid of the things you don’t really need.  Once you have ensured that you will be spending less than you are earning, you are on the way to being debt free.

 Be sure to budget for some fun stuff, too.  If you don’t, your budget is sure to fail.  Besides, with this new budget you will be able to afford to have fun!

The part that requires the most discipline is to actually follow the budget you have set for yourself.  As you spend money throughout the month be sure to keep track of it using a simple Excel spreadsheet, or you can use a program such as Quicken.  We use Quicken Cash Manager 2008 and it has been really helpful in showing us where we are spending our money.   Quicken has a “control my spending” feature that allows you to set a target amount that you are willing to spend each month for the category of your choice and then it provides a detailed list and totals up your expenses in that specific category.  It makes it really easy to see how much or little you have left to spend.  By keeping track of the money you are spending it keeps you accountable and you will suddenly realize how much all the little things add up.  You will be more likely to spend your money wisely and you will be surprised at how much you are able to save.

Once the month has passed, review how well you followed your budget.  Feel free to adjust your budget if you need to make it more appropriate for your lifestyle, but always make sure that you spend less than you earn!  If you continue to follow your budget and keep track of your expenses, you will be rewarded by living a life free of the worries of consumer debt.

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