Getting it All on Paper – How to Make a Budget

Congratulations! You’ve decided to make a budget. This is an important first step on the way to financial freedom. But where to start? It can seem overwhelming at first. But if you take it step-by-step, it’s relatively painless.

There are many computer programs that will walk you through creating a budget, or you can make one yourself with pen and paper.  You’ll figure out which is more comfortable for you. However, the following steps are the building blocks of creating a budget.

1. Track your expenses for one month. Record everything you spend—everything, including that fifty cents for the paper or the three dollars for a cup of coffee. Save receipts.  You want to know exactly on what you’re spending your money. Also, write down expenses that only happen periodically, for example, car insurance or property taxes. Divide by 12 and add to your monthly expenditures.
2. Next, write down your net income (how much you bring in after taxes). Subtract all those expenses from #1 from the total from #2.
3. Compare. Is the number you get positive or negative? If it’s positive, congratulations! You are spending less than you are bringing in. Use the extra to start a savings account or to pay down some debt. If you’re like most people, though, the number will be negative.
4. Adjust. Look through your expenditures and see where you can cut down. Do you really need both Netflix AND movie channels on your cable? Are you getting the best deal on your cell phone plan? Cut any area of your budget that allows for flexibility. And be ruthless.
5. Build your budget. Create your budget with your new allocations. Don’t forget to put some money away for an emergency savings fund. This will prevent major headaches in the future.
6. Review your budget. Make sure it’s realistic. Can you live with it? Are you still seeing a negative number? You may have to make some very serious cuts, or consider getting a second stream of income.
7. Take it seriously. Now that you have a budget, live by it. Continue to track your spending and continue plugging in those numbers to keep yourself on track. Tweak the numbers as your needs change over time.

If you complete this process and still find yourself coming up short every month it may be time to look toward getting professional help.  Reducing revolving debt can be a great place to start or if you have a mortgage that is unaffordable it might be eligible for a modification.  A full service debt relief law firm like Harold Shepley & Associates helps people everyday get a plan that is affordable for them and will eliminate their debt.  They can answer any answer any questions you may have about debt and bankruptcy, and they will do it for free.  Contact them today by phone 1-866-284-7062 for a free consultation or find out more at www.shepleylaw.com 

By Harold Shepley | Published February 28, 2012 | Posted in Credit, Debt | Tagged budget, debt, Harold Shepley & Associates | Leave a comment