Create a Budget: How To

How to Make a Budget That Works

Creating a budget is quite easy—but a budget that you can stick to like glue seems impossible to create. Yes, the correct way to start a family budget is to list down all items on a piece of paper.

There should be two columns: ‘Expenses’ and ‘Income’. The total amount of money you earned is also known as the income. But the act of budgeting gets difficult when you start designating money for each item. How much should be given for food, shelter, and other necessities?

The best solution to this problem is to perform a trackback on all types of expenses first. Scrutinize the family financial state for some period of time. For one or two months, you must list down all expenses you had right to the last cent. The sum total of the money spent should tally to the sum total of the money earned.

Remember, a budget strategy is unique for every user. It is not a uni-size shirt that fits to everyone. You have to know everything about your spending habits before you can allot a certain amount to a particular item in your expenses.

2 Categories of Expenses

1. Essential. These are necessary items that everyone needs to spend money on to be able to live with some comfort. Under this category falls 2 types of essential expenses: varied and fixed.

• ‘Fixed’ covers the house rent or mortgage and other monthly dues with a set amount. (Examples: telephone, cellphone, cable, and internet.) Annual expenses include property and personal taxes, car check-up, home maintenance, and medical expenses.
• ‘Varied’ mostly consists of food, transportation, debt payment, savings, personal grooming, and clothes.

2. Non-Essential. These are miscellaneous expenses like gifts, car repair, home repair, parties, holidays, and personal treats such as a cup of latte or an expensive chocolate bar.
A Sample Budget Plan

EXPENSES:

Essential – Fixed/Monthly:-

• House Rent/Mortgage
• Insurance
• Telephone/Cellphone
• Television Cable
• Internet

NOTE: Get the total and subtract the lump sum from the monthly income. Want to save more money? Find a company that offers bundled services for telephone, internet, and cable to lower monthly payments. Check your cellphone subscription for unused minutes and even hours that you paid for every month.

Essential – Fixed/Yearly (Divided by 12):-

• Property Tax/Insurance
• Personal Tax/Insurance
• Medical Check-Up
• Car Check-up
• House Maintenance

NOTE: It is wise to set aside the monthly equivalent of these inevitable annual expenditures. On the twelfth month, you won’t have to worry about a tightening in your cash flow when these necessities are due for payment.

Essential – Varied/Monthly:-

• Savings (10 percent equivalent of monthly earnings)
• Credit Card Payment
• Electricity
• Water
• Food/Grocery
• Transportation/Gas
• Personal Grooming
• Clothing

NOTES: Some of the items here can be tweaked low or high, according to your wish. With the exception of the top 4 on this list, the amount of cash designated can be decreased or deleted.

Both the savings and credit card payments should never be less. It always pays to keep their usual amount up—never down. Pay yourself and your debtors first!

Different kinds of adjustment can be done when cash is short for both the food and transportation. Buy lower-priced store brands and use discount coupons to keep costs of food and grocery within your means.

Of course, you can do without clothing and personal grooming for a month or two. And when you have some money for clothing, buying clothes at the thrift stores will save you some money. Coloring your hair at home is also easy and inexpensive.

Non-Essential/Monthly:-

• Holidays
• Parties
• Gifts
• Car Repair
• House Repair
• Personal Treats

NOTES: The top 3 on this list can be considered as ‘essential-varied’ expenditures because these are often anticipated. Christmas and other holidays are celebrated on the same dates every year. Saving small amounts of money for these events will help ease your budget. No more manic use of plastic cards.

Got a tire bust or pipe leak? No worries anymore, if you’re setting aside some cash for these kind of emergencies. Got a sudden craving for chocolates or pizza? Dig in ‘coz you can afford it — and certainly deserve it!

More Budgeting Tips

• No budget plan is perfect. Always check the areas where you tend to overspend and underspend.
• Seek professional help when overspending seems habitual. Or use a budget calculator that will help keep your expenses on the right track.
• Do not overlook the long-term goals such as saving for retirement or college education for the children.
• One simple and painless way of saving money to buy a gadget like iPod is to keep your coins in one place like a piggy bank or a big jar.
• Always use cash when shopping—especially when you’re way behind credit card payments.

Wives Having a Solid if Not Fool-Proof Budget Plan Will Certainly Not Look Like the Wife Below… lol