How win at budgeting

Here’s a question you may have seen a few times, do you know exactly where your money goes each month? If you are unable to account for every dollar, then you may need to create a plan. A budget is merely a spending plan for managing your money over a given period of time – in this case, we’re going to budget each month.

Preparing your budget is as simple as one, two, three:

• ONE: List all of your income (by source if you wish). This is your total take-home (after tax) pay for both you and, if you’re married, your spouse. Include everything — full-time jobs, part-time jobs, consulting gigs, your Social Security check, royalties from your Shih Tzu’s acting career. You want to list any source of income.
• TWO: List all of your expenses. Write down, and maybe categorize your bills – regular monthly and irregular bills. You want to identify things like your mortgage or rent, car note, childcare, electricity, insurance, even quarterly payments…anything due or needed for the next month like food, gas, food, clothing, food, date night, and anything else that comes to mind (like food).
• THREE: Subtract expenses from income and keep adjusting until you get to zero. Adjusting by determining what to eliminate or where to place money not assigned to a “line item.” Following this method is called a zero-based budget. Once you’re done paying all of your expenses, or paying into a savings plan the total should equal zero. If not, keep refining until it does.

There you have it – the one, two three’s of creating a budget. Now you only have to track your expenses to ensure you remain on target. If you’re using a debit card more than cash, it might be helpful to pull out your bank statements and review and highlight expenses that were not in your budget.

If necessary, you may need to adjust your habits. This budgeting thing takes a little while to get used to. Do your best to use pencil and paper until you get used to mechanics of the process; technology has a way of making us forget the basics.