BUDGETING 101: Creating A Budget

This is the first in a two part series on creating and maintaining a budget.

1. Evaluate Your Cash Flow:

  • Track Your Income: The first step in creating a budget is tracking all of your different forms of income including: scholarships/fellowships, loans and work payment.
  • Track Your Expenses/Spending: The second step is tracking your expenses, make sure to include your priority expenses (housing payments, bills, groceries, etc.) as well as your discretionary spending. You can do this in a variety of ways:
    • Worksheet Method: Some people still enjoy putting pen to paper, if that is you check out this worksheet.
    • Excel Spreadsheet: Microsoft provides a variety of personal budgeting templates.
    • Budgeting Software: There are a variety of different programs out there, one of the most popular is Quicken.
    • Online Site: Again, there are a variety of sites. I use Mint.com because it syncs with my bank account, categorizes my transactions and tracks my budgets all in one place.
  • The Bottom Line: Subtract your expenses from your income to see how you are doing. Is the number positive or negative? If your number is negative, you are spending more than you are earning. The goal of budgeting is to create a plan to spend less than you earn. If your number is positive that’s good but it’s not the end of the conversation. It’s important to make sure that you are maximizing your assets and planning for the future.
  • Aligning Your Spending with Your Priorities: Evaluate your spending and make sure that your spending reflects your personal values and priorities. Is your money going to the places and people that matter most to you? Are you taking care of your needs before you are taking care of your wants? What are some doable trade-offs that you can make?

2. Create Your Budget: Use your tracked expenses to create your budget categories, be as specific as you like. Make sure that you account for both your priority expenses and your discretionary spending. Be realistic with your expectations and make sure that you don’t forget to:

  • Prepare for the Unexpected: Do you have an emergency fund to draw on if you lose your job or incur unexpected expenses (car repairs, medical bills, etc.)?
  • Plan for the Future: Do you have a savings account that you regularly contribute to? Even a small amount (such as $25) every month can add up. Are you investing in your retirement? Are you saving up for a large purchase (computer, car, house, etc.)? If you have student loans, could you pay off the interest now?
  • Save for Occasional Expenses: Do you have a way to pay for occasional expenses? Make sure that you take into account how you will pay for Christmas and Birthday gifts, travel for the holidays and other occasional expenses so that these expenses don’t break the bank.
  • Problem Areas: As you tracked your spending did you find any problem areas? If so, gently challenge yourself to be more frugal in those areas. Remember to start out slow, it takes a long time to change a bad habit.
  • Have Fun: Where is your discretionary spending? Many people when they are first budgeting forget to give themselves some room to have fun. While it is important to be frugal and align your spending with your values, it is important to have some space in your budget for the fun stuff.
  • Be Flexible: It can be difficult to precisely predict your spending, especially if this is your first budget, so be flexible. If you have to switch some things around to better fit you, that’s fine!

Join the conversation. If you appreciated this post, consider “liking” this post in the “leave a comment” section. Or, join the conversation by leaving a comment: How do you budget? What are some strategies that you use?

Advertisements

14 thoughts on “BUDGETING 101: Creating A Budget

  1. Just one more great way to save lots of income upon auto tires is always to employ payless coupon codes. You can choose a lot of discount coupons regarding different elements. You’ll find inexpensive exhaust coupon codes and affordable auto deals while successfully which can be employed for car repairs. A price reduction car voucher might be incredibly handy if you’re holding serp issues. Coupons are a great way in order to maintain bucks high are a variety of discount codes easily available on the market. The highest approach to discover a discount that you can use is to appear and feel on their behalf in the magazine. You may also learn coupon codes for the on the web. It is possible to track down discount codes on-line or perhaps get very simple computer discount coupons from a site. Payless coupon

  2. Pingback: BUDGETING 101: ABCs of Maintaining a Budget « frugalcommunity

  3. Pingback: Frugal New Year’s Resolutions: Will 2012 Be Your Year? « frugalcommunity

  4. Pingback: Aligning Your Spending with Your Values | frugalcommunity

  5. Pingback: 13 Frugal New Year’s Resolutions for 2013 | frugalcommunity

  6. I personally Feel blog, “BUDGETING 101: Creating A Budget
    | frugalcommunity” was really good! I reallycan’t agree together with u more! At last looks like I reallyuncovered a blog website well worth reading through. I appreciate it, Torsten

  7. Pingback: Student Loans: The Best-Kept Secret in Higher Education | frugalcommunity

  8. Pingback: Frugal New Year’s Resolutions for 2014 | frugalcommunity

Join the Conversation

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s