Budgeting

Creating a personal budget is at the core of financial freedom. If you do not have a plan to track how you spend your money, chances are things will get out of control. Once this happens, it is much harder to get back on track than if you had followed a plan all along.

How do you make a budget? Where do you start the budgeting process? Well, here are some tips on creating your own monthly budget plan.

Creating List of Income and Expenses

The first step in creating a workable family budget is to make a list. List all of your income first. It is important to include all of your sources of income. Even that small interest check that comes in should be listed. If you cut the occasional neighbor's lawn, put down those ten bucks. Little things add up, and having an accurate picture of your income is very important.

Next, list all of your regular bills. These include things like your mortgage, auto and home insurance, electric, water, cable, phone, cell phone, and any other regular monthly bills. List when they are due and how much each is. If it fluctuates, write down an average amount.

After you have listed your regular bills, you should account for any other types of expenses. This means things like groceries, gas, clothes, personal items, haircuts, and other variables.

It is important to also budget in your fun items. These are different for everyone, but examples could be things like movies, scrapbooking, eating out, and stamp collecting. If you don't budget money in for those things then you will quickly become disillusioned and give up on your budget.

Finding Areas Where You Can Cut Back

So now you have listed all of your income and all of your expenses. If you have a hard time thinking of all the categories, there are lots of great budget spreadsheets and budget programs that will help you make up your financial plan. Take your total expenses and subtract them from your total income. This will give you the amount that you are over or under budget.

If you are over your budget that means that you are spending more than you make. This is a very bad thing. For many of us, that overage ends up on a credit card. Then you are paying interest and this is just not necessary. You should never use a credit card to supplement your income.

Take the number that is over and see where in your personal budget you can cut back. Sometimes that means making hard choices and giving up some things. In the end, though, the reward is worth the effort.

While some people think of a household budget as a constraint, it is actually allowing you freedom from stress and worry about finances. You know that the money has been set aside for your expenses and you can focus all that energy on other things.