Starting a Budget

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Fortunately, creating a workable household budget -- one that gives you the tools to make sure you're not overspending each month -- is easier than you might think.

All it requires is taking an honest look at what you spend each month and what you earn. The hardest part is sticking to your budget once you've drafted it.

Eliminating the Fear From Budgeting

A budget is nothing more than a financial document that you use to track your income and expenses. You can use electronic budgeting software to create your household budget, an Excel spreadsheet, or paper and pencil. Choose the method that feels right for you.

One Money Design recommends that you set a definite date -- one that's not too far away -- to create your budget. If you are married or living with a significant other, you'll want to include them in the budget planning. This is important; a household budget will not succeed if both of you are not on the same page with your spending habits.

When you start to create your budget, you'll need some necessary paperwork for reference, most notably your most recent bank statements -- preferably at least three months’ worth. You'll also need things like paycheck stubs, rental checks or disability payment stubs that document your monthly income.

Income and Expenses

To start your budget, list your regular monthly income streams. This will obviously include your monthly salary. It should also include any rental payments you receive, child-support or alimony payments, payments you receive for freelance work, etc...

Now that you know exactly how much money comes into your household each month, it is time to list all the money that flows out.

A budget typically includes both fixed and variable expenditures. Fixed expenses include your monthly mortgage bill, car loan payment, student loan payment, monthly garbage service and/or rent. Others vary each month. This includes the money you spend on groceries, electric bills, the phone bill, the money you spend on gas, clothing and the dollars you spend on entertainment. Your budget should also include savings reserved to build an emergency fund. This way, if an emergency does happen you will not have to add more debt to take care of it.

The key to listing expenses is to be realistic. Meaning you should include money for going out to the movies, eating out, or taking short trips. You'll also want to adjust your budget regularly. Adjust for changes such as the number of hours you are working each week, holidays, birthdays, etc...

Shoring up Your Budget

If you find that you are spending beyond your budget every month, it's okay. Practice makes perfect and it may take some time to adjust to your budget and change your spending habits - keep trying!

Maybe you've been too strict with how much you want to spend on clothing and entertainment each month. Adjust those budget items so they more accurately reflect how you live.

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