Where to Start When Creating a Budget


In these economic times, having a budget can be the key to keeping one’s head above water financially. Constructing a budget from scratch sounds more complicated than it really is, and investing just a little time to sit down and crunch some numbers will help ease financial worries.

First, record your budget cleanly and legibly so that you can always access it, or your spouse or significant other can do the same. Writing it neatly will mean you will be able to keep track of your numbers without getting confused.

To start creating your budget, record your income and when you get paid. If your income fluctuates for some reason, such as the addition of tips to a base salary, include the base salary and the average your tips, keeping the latter amount for later on.

After this, record when your bills are due and their average amount, which you can usually find on the last bill received. Some important things to include are rent or mortgage, electricity, cable, phone, heat, car payment, etc. Make sure to organize these so you know when each is due, so you don’t get behind on any of them.

If you have credit cards, add in payments you make on those. Record the max limits of each of them, and any other spending limitations or bonuses. This way you’ll know which card is best to keep for serious emergencies, and which will earn you something like cash back bonus on more frequent purchases.

If you owe monthly payments on any rentals, loans, or other things, record those amounts and due dates as well. This concludes all of the things you have to pay without damaging your credit or your life, which we’ll deem essentials. Tally up what your essential budget is, and compare it to your earnings.

From this point, try and evaluate the rest of your usual spending. What is your average trip to the mall costing you? How much do you spend on groceries, clothing, school supplies, or luxury items? Are you an impulse shopper, or do you plan things out? Mapping out these purchases may even require you to look at your past credit card bills or bank statements. If you see a pattern of irresponsible spending, budgeting will help you correct it.

The purpose of a budget is to allocate funds, which you can now do now that you know what your essentials, your earnings, and your luxuries are. Remember that these categories aren’t fluid; for example many people don’t consider having cable or satellite television an essential. Is it really for you? Evaluate the payment, and if you decide on keeping it, consider shopping around for a better deal.

After making adjustments, your budget will allow you to know what your free spending money is. That doesn’t mean that you have to spend it all! Saving some of it is one of the wisest choices you can make. A rainy day fund will come in handy when emergencies occur, and you’ll be grateful that you put away some of your earnings just in case.

If you do choose to spend the wiggle room in your budget, be sure to review your purchase, especially if the budget isn’t just your own. Thinking about every purchase means when you tally up your budget, preferably weekly to adjust for any changes in fluctuation of funds, that you can do so without guilt. Whatever you do, make sure not to let reviewing your budget become a negative thing! The numbers might be disappointing, but you shouldn’t dread them if you manage to control your spending and you have a thorough understanding of your money.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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