Creating a Workable Budget

Creating a budget is something that many of us put off as long as possible. Unfortunately, one of the quickest ways to accumulate debt is to operate without a realistic budget. If you are faced with the task of home budget planning and are not sure where to begin, try these tips.

Step 1: Know how much income you have to work with.

A simple fact of life is that in order for your budget to work, there must be enough money coming in to cover each line item in that budget. While this seems like a common sense approach, far too many people start with thinking of their income in terms of gross wages or salary, instead of net. Lose this approach and focuse your home budget planning on allocating the money that actually gets into your hot little hands.

Step 2: Learn the difference between a need and a want.

To create a budget that has half a chance of succeeding, it is important to classify expenses so you know what is essential and what is not. At times, this can be a little tricky, since there may be a little "want" surrounded by an obvious "need". For example, nutritious food to prepare at home is a need. A trip to your favorite fast food place is a want. The fact you don't really want to cook is beside the point.

Step 3: Identify your fixed expenses.

Monthly expenses like the rent or a mortgage payment are typically considered fixed expenses. Since these are not subject to review or change, they form the basis for budgeting your money and planning the monthly outgo of your hard earned income.

Step 4: List your variable expenses.

These are the expenses that occur each month, but may be a little more or a little less than the previous month. The idea here is to come up with a workable monthly allotment that can be adjusted based on past experience. If you use more power during the summer months, be prepared to adjust that expense from May to September.

Step 5: Compare income to expenses and see how things look.

With a little luck, you will have created a budget that not only covers all your expenses, but also leaves a little bit extra. If your income doesn't cover all the expenses, go back and slash some of your variable expenses a bit. Chances are there are a few wants nestled in there somewhere that can be cut loose with a little effort.

Step 6: Reward yourself at the end of the month.

When you do have more income than expenses for the month, make sure to place a percentage of that surplus into some type of savings account. Take the remainder and treat yourself to something you've been craving. Having a little something extra from time to time makes it easier to stick to your budget the rest o f the month, and gives you something to look forward to.

Tips:

Don't get discouraged if you fall off the budget wagon at first. It happens to everyone. Learn from your mistakes, make any budgetary adjustments that are necessary and give it another go. In time, you'll find that budgeting is not as bad as you thought, and watching your bank balance grow will make you feel warm and fuzzy each time you make another deposit of that surplus.