Tips and Steps for Creating a Great Budget Plan

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Creating Your Own Budget

The most basic part of any financial plan is the creation of a realistic monthly budget. Until you know where you money is going each month, it will be impossible to get a handle on your spending and put money away for a rainy day. The following tips will help you create a budget that works for you.

Tips for creating a budget

ü Make the categories on your budget worksheet detailed enough to fit your needs. If you eat out often, for instance, create a category for “meals out” or “restaurant meals” instead of just lumping them in the food category.

ü Do not over complicate your budget however. You do not need to add a category for every single expense, just for the expenses that occur often enough to warrant a category of their own.

ü Tailor the categories of your budget worksheet to meet your needs. It is fine to start with a generic budget worksheet, but it is important to customize that format to your needs.

ü Remember that a budget is not meant to be a punishment. Instead, a budget is a tool to help you get out of debt and save for the future.

Steps for creating an effective budget:

Ø Begin with a standard budget worksheet. These worksheets can be found at many web sites and are also included as part of many financial software packages.

Ø Gather your bills, reciepts and cheques for the past two or three months. Assign each expense to a category (or create a new category if necessary).

Ø Go through your pay slips for the last few months and determine your average monthly gross pay.

Ø Determine a realistic amount for each budget category on your spreadsheet. You can use the historical information you have gathered in addition to reasonable assumptions about future expenses.

Ø Also determine projected amounts for your income. Include all income sources, such as your job or jobs, child support and any other sources of income.

Ø Determine a target amount for each category of spending. The ideal target will be lower than your current spending but not so low that the goal is unreachable.

Ø Keep track of your cash expenditures for the month and determine how close you come to achieving your spending goal.

Ø Make reasonable adjustments as you go along. If you consistently find yourself falling behind or spending more than you make, you may need help to control your spending, or you may need to find additional sources of income until things are balanced out.

Created by Ryann Cairns