Creating a Budget That Fits Your Life

by Kyle Taylor on January 16, 2013

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Piggy BankCreating a budget isn’t the most fun or exciting thing you can do with your time. Unless you have taken online accounting programs, it may seem like a daunting task. Yes, it can be a tedious and stressful process to face the cold, hard reality of your financial numbers. But if we know it’s one of the most vital steps you should take to get your finances on solid ground, why isn’t everyone creating (and following) a budget…yesterday??

The truth is that people sometimes don’t understand everything that’s involved in setting a successful budget. They often forget that the devil is in the details when it comes to fully understanding where their money is coming from and, most importantly, where it is going.

Here are some easy steps you can follow to set up a successful budget today:

Gather your information. This means everything. Every pay stub, utility bill, investment account statement, medical bill, mortgage or rent check, etc. Organize everything into piles of income sources and expenses to make the next steps even easier. Of course there are ways to make this easier. TurboTax offers budgeting and tax software that automates and simplifies a lot of the work for a wide variety of situations, even tax refund estimators.
Add up your income. If you have multiple sources of income, now is the time to tally up the total sum of money you bring in. If you have one job which auto-deducts your taxes (as most do), record the pay you bring home each month.
Create an expense list. Up next is to total all of your expenses. It’s easiest to begin with your fixed expenses first; those expenses that you have to pay monthly no matter what (utilities, mortgage/rent). Next, tally up your variable (groceries, gas, entertainment, etc) and irregular expenses (those which you pay annually or quarterly). Finally, remember to add in savings and retirement investments that aren’t auto-debited from your paycheck.
Don’t forget the debt. Make sure you’re also accounting for your monthly debt payments if you have any. If you’re looking for better credit options to fit your budget better, consider comparing credit cards at Totally Money, a website that helps you take the guess work out of choosing a credit card.
Record and report all expenses and income monthly. For any expense you recorded that isn’t paid monthly, divide the total annual sum by 12 to get your monthly cost. Set your budget up as a monthly entity so it’s easier to track your progress and make any necessary changes month-to-month.
Ensure equality. When totaling up your numbers, the end goal is for the expenses to be equal to (or less!) than your total income. If you find your expenses to be higher than your income, it’s time to revisit the variable and irregular expenses to see where you can cut back.
Review, review, review. A budget doesn’t work with a set-it-and-forget-it mentality. You need to be monitoring it regularly and making necessary tweaks to ensure your efforts are balanced.

By following your budget, you’ll be able to see where you need to make changes, and you’ll ultimately be setting yourself up for future success with the better money management skills you’re gaining.

**Photo by Greg_e on Flickr**

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