How To Write a Budget

Knowing where you are spending your money is a key in controlling your finances.  Most financial experts and amateur bloggers (like myself) suggest doing a monthly budget.  A budget is the best way to help you keep on track your income, expenses, and savings.  Whether you use a computer program or do it the old fashion way with a pencil and a piece of paper, the important thing is that you see where your money is going.

Every month, I sit down and plan the budget for the month and take a quick glance at the yearly budget.  I have a notebook that it is dedicated to this which I keep on my office desk.  At the top of the paper I write the month.  At one end I write my income and in the other the expenses.  Then, you simply subtract your income from the expenses, and you have your savings.  That’s it.  It doesn’t take more than 10 minutes to do.  Here is a simple explanation to the different parts of a basic budget:

Expenses.  When writing down your expenses, make sure to write down everything that is a necessary expense, such as bills, food, and maintenance.  I would also suggest adding a category for entertainment, and a category called buffer money.  The goal is to only spend exactly what you wrote down or less.  The category called buffer money will be used in case you underestimate a category.

Income.  This is simply the amount of money you get monthly after taxes.  If you are using automatic deposits (which I suggest) for your 401k and/or another type of long term investment, do not count it as part of your income.  Remember to always pay yourself first.  That way, you will have an automatic way to save for your retirement and future financial goals without worrying about budgeting for it.

The word budgeting has always had a negative connotation.  When my fiancee and I first started discussing it, she really irked at the sound of the word.  Now, after seeing her money grow, learning where her money is going, and gaining control of her finances, she looks forward to sitting down monthly and planning her budget.  Most people who have control of their finances have some sort of system to keep track of their spending.

I have given you a very basic starting point into how to write a budget.  Here are some useful links that can help you further with this subject:

These links are brought to you by JD at Get Rich Slowly. 


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