A budget is a plan for your future income and expenditures that you can use as a guideline for spending and saving. Although many Americans already use a budget to plan their spending, the majority of Americans also routinely spend more than they can afford. The key to spending within your means is to know your expenses and to spend less than you make. A good monthly budget can help ensure you pay your bills on time, have funds to cover unexpected emergencies, and reach your financial goals.
Most of the information you need is already at your fingertips. To create or rework your budget, follow the simple steps outlined below to get a clear picture of your monthly finances. You can also use our free online budgeting calculators below to budget for certain specific purchases or events.
1. Add Up Your Income
To set a monthly budget, you first need to determine how much income you have. Using the worksheet at the bottom of this page, write a dollar figure next to each relevant income source. Make sure you include all sources of income such as salaries, interest, pension and any other income–including a spouse's income if you're married.
If you get a salary, be sure to use your take-home pay rather than your gross pay. Taxes are usually taken out automatically, but if they're not, remember to include them as another expense. If you receive money from somewhere not listed, enter the source along with the amount under "other income."
2. Estimate Expenses
The best way to do this is to keep track of how much you spend for one month. The worksheet below divides spending into fixed and flexible expenses. Fixed expenses are those that generally do not change from month to month, such as rent and insurance payments. Flexible expenses are those that do change from month to month, such as food or entertainment. If some of your expenses for one or more categories change significantly each month, take a three-month average for your total.
3. Figure Out The Difference
Once you've totaled up your monthly income and your monthly expenses, subtract the expense total from the income total to get the difference. A positive number indicates that you're spending less than you earn--congratulations. A negative number indicates that your expenses are greater than your income. This means you will need to trim your expenses in order to begin living within your means.
Well done–you've created a budget. The next step is to track your budget over time to make sure you're sticking to it. If you find you aren't able to follow your budget successfully, it may mean that your plan isn't flexible enough. It can take revisiting your budget a few times to find the balance that works for you.
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Posted by: Bevie50
I have a problem with facing my bills and managing my money, is there a good program to us that is user friendly and secured?
Posted by: Deeeeeee
The biggest challenge for me is to Estimate my Expenses. Part of my did not want to let go of the wants versus the needs.
Posted by: 750honda
I always plan my payroll check ahead, because I am on salary
and my pay never changes. It's has never been a problem for
me to save money.
Posted by: mandyjo123
This is my problem. Six months ago my husband was out of work for three months. We had no savings and could not borrow against anything as penalties would have been greater. Since he started working again, I am always in the hole with bank fee after bank fee. Like 300-500 a month. The bank has been good to us but I just cannot catch up. Not only have we cut back drastically, no vacation in five years, consignment shop clothes, one car, higher deductables, no credit cards, kids in public schools, we now are being garnished 2000.00 a month for a car we turned in as the bank would not work with us after having a loan with them for 15 years. Like this week our air went out, GOD was that bad, then now I have lost all my food as my fridge won't cool and that will be another service call for 80.00 on Friday when I can afford it and 150 at least to restock the basics in the fridge. We have NO credit at all, we consolidated we have done everything. Any suggestions out there?