Monthly Archives: August 2016

How to Create a Budget & Stick With It

Creating a budget for your household is very important but can feel like an overwhelming task. Here are some steps to help you get started.

1. Calculate your total income and expenses for a month. Start by looking at your paystubs and add up the net amount from each paystub for a month (your total income). Then write down all of your regular monthly expenses (i.e., rent, car payment, groceries, gas, entertainment, etc.) and add up how much you are spending. You will also want to include irregular expenses (i.e., insurance, property taxes, gifts, tuition, etc.). To determine the monthly cost of your irregular expenses, add up all of the irregular expenses for the year then divide that total by 12.

2. Now that you have calculated your total income and total expenses, you have to figure out if you are spending more money that you are earning or if you are saving money each month. Simply subtract the total of your regular and irregular expenses from your total income. If your expenses are more than your income, then you are accumulating debt each month and need to cut back on your expenses. If your income is more than your expenses, you are saving money each month.

3. If you need to cut back on your expenses or would like to save more money each month, then you should examine all of your expenses and figure out where you can save money. A good way to start is to separate your expenses into essential and non-essential groups. For the essential expenses (i.e., rent, electricity, food, etc.) are there ways you can save on those bills? Using coupons or shutting off lights and unplugging appliances when not in use can start to save you money. For the non-essential items (i.e., eating out, entertainment, etc.) are there items that you can live without? And what are ways that you can still do the activities that you enjoy but not continue accruing debt? Stopping your Starbucks visits, committing to eat out only once a month, or attending matinees instead of evening shows are great ways to start to save money.

If you start with these three steps, you will be well on your way to creating a household budget and having a more secure financial future. Just remember that sticking to a budget is difficult and it may take a few months before you are able to do it, but don’t give up! There are also apps like Mint and GoodBudget that can help you stick to your budget.

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