So, you’ve kept track of all your expenses and income…now you’re ready to create your budget.
Create Budget Categories – divide each expense into a category such as rent/mortgage, groceries, household goods/toiletries, gas, etc. Split them up however it works for you. Some people combine groceries and household goods into one category, since they don’t want to have to split receipts from a store like Walmart.
Don’t Forget about Fun – you don’t want to have fun at the expense of your savings, but if your income allows for it, you also want to factor in some fun money for entertainment or spending money for you and your spouse. A budget can still be fun :-).
Account for Every Dollar – every dollar should have a job. That doesn’t mean that you need to SPEND every dollar, but you need to allocate any extra money to saving for the emergency fund, retirement, college, etc rather than letting it sit in your account. It will probably get spent if it’s not allocated.
Balance Your Budget – on paper this is the easy one…your expenses and income should equal each other. However, sometimes it just doesn’t work that way. Get creative and think of things that you can do to trim the variable expenses like groceries/toiletries, etc or brainstorm ways that you can make extra money.
Follow Your Budget – once you have created your budget, you need to make sure that your spending stays within the category limits. If you overspend in a category, you need to either spend less on that category the next month or spend less in another category to make up for it.
Periodically Adjust Your Budget – your needs will probably change over time, so make sure that you reevaluate your budget every once in awhile. For example, If your child becomes potty trained, you can probably lower your household goods/toiletry budget. Plus, you may find that you over or under-budgeted a category that needs to be adjusted.
What about you? How do you budget? Do you have any budgeting tips you’d like to share?
More about Budgeting: