How to Create a Perfect Budget

Mention the "b" word at a party and you're sure to stop conversation in its tracks. You know the word. The one that is guaranteed to elicit a shudder and flood even the most frugal of us all with guilt.

Budget.

Some financial gurus have taken to calling it a "spending plan" because of the negative connotations of the word. But whatever it's called, the result is the same: it requires attention to money, which is the last thing we want to pay attention to, especially when we don't have any.

We all know why budgets are important. They allow us to get our spending under control, which leads to getting our debt under control, which leads to financial success and freedom. But knowing why they are important and actually trying to put one together are two vastly different things. Actually sitting down to write out a budget can cause even the most responsible adult to break out in hives. However, no matter what your income or debt level and no matter how much you know or don't know about finances, there are a few universal tips that can help make budgeting easier.

1. Track your spending. This is the basis for your budget; however, this doesn't mean that you have to write down where every single penny goes for an entire year. Try tracking your spending for two weeks or a month. Or give yourself a small allowance-ten to twenty bucks per week should be fine-that you can spend on small splurges without having to write it down. The idea is just to understand where your money goes.

2. Make choices. When people first approach a budget, many of them think of budgets as simply cutting back by spending less. The idea here, though, is to spend in a picky way. Think homemade dinner is about the same as take home, but can't imagine living without your monthly facials? Then eat at home more often and use the savings to pay for those facials. Or trade in a premium movie channel for monthly tickets to sports events. The key is to make choices about what is important to you and what isn't. Cut out what isn't important to you and you'll find more money for the things that are.

3. Spread it out. Do you get weekly manicures? Get your car washed every month? Try adding in a few days or weeks between regular appointments. This is a fairly easy and painless way to "find" more money by paying for fewer services. If you get a manicure every eight days instead of every seven, for example, you will have six fewer appointments per year. At $20 each, that would give you an extra $120 per year, all by waiting an extra day.

4. Keep it simple. You don't want to feel overwhelmed, so keep your categories broad enough to encompass several things. For example, you could have separate categories for "groceries" and for "alcohol," or you could put them together under one umbrella. When starting out, go for fewer and broader categories. Five to seven is a good starting point for most people. You can always add categories later.

5. Don't lose sight of the big picture. A budget is there to help you get a clear idea of what you want to spend and what you are spending. It's also a way to see how you spend your money so that you can spend in ways that you want to spend. Keep these goals in mind and don't get sidetracked. Also remember that a budget will change and evolve as you do. Don't let yourself become too rigid with it.

Budgeting is an important part of financial life, but it doesn't have to be a painful one. With a little time and thought, anyone can create a budget that allows them to maximize what they have and minimize financial stress.