Been talking about getting a better handle on your finances? The best way to do that is to create an actual budget. You might think budgets are kind of a pain, but they don’t have to be. Make it Easy Peasy–think about the process as a spending and savings plan. Figure out your resources and then decide how you want to allocate them. Viola! You have the beginnings of a budget! Sometimes it’s good to start with the basics, such as the basic outline for a budget and the categories you want to include. Here are some tips to help you create a simple family budget.
Income
What do you have coming in? The first place to start in the outline of your budget is with your income. There will be some estimating here, no doubt; but make sure it’s estimation, not dreaming! The income area of your budget is not the place to write down wishes or maybes. Simply take a look at your net income over the last three months and estimate an average monthly income. Or you might have income that changes very little month-to-month; it should therefore be pretty easy to figure out your monthly income.
Expenses
Next up is expenses—all of them. It’s good to include enough detail that you have a grasp on things, but splitting your expenses into dozens of little categories will probably only frustrate you. Try to make your categories fairly general – “entertainment,” for example, is a more general category than “computer games, movies, cable, and DVDs” listed as separate categories. There will probably be more estimation here than in the income category.
As you break down your expenses into understandable categories and numbers, remember that charitable giving or any giving away of money should be also listed as an expenditure.
Actual Expenses
Estimation gives way to “real” numbers when you write down your actual expenses during the month. This is the last section of your budget plan. Keep a running tally of your expenses for several weeks, and then look at where you are. Are you surprised at the actual expenses you have?
Some Basic Guidelines
* Are your expenses actual needs or wants? This can be a hard one, but it’s vital for a budget to function properly. Watch out here—don’t convince yourself that a want is a need when it isn’t – you may just be trying to find an excuse to buy the item. Real needs are things like clothes, food, and shelter; but designer clothes, gourmet food, and a palatial dwelling are more like wants!
* Duh! Expenses should not exceed income. You may find yourself surprised the first time you do a budget and discover that you actually don’t make enough money to cover your expenses. If you discover this, you need to look carefully at your income section and see where you can increase it, and look just as carefully at the expenses and see where you can make cuts.
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