Building a Budget: Making it Last

Building a budget (and actually following it) may seem like a daunting task but taking control of your finances is easier than you think. This step-by-step guide offers several easy ways to manage your money.

Step 1: Calculate what you spend

Before you come up with a plan, try the following to add up your monthly expenses:

• Gather your paperwork. Pull up last month’s bank and credit card statements to see a list of your purchases and bills paid. If you frequently use cash, use your debit card to pay for cash purchases for two weeks (or keep receipts) to get a clear picture of what you spend in a month.
• Add seasonal costs. Add up all your irregular expenditures (like tax payments or vacations) in a year and divide by 12 to come up with a monthly amount you need to put aside to cover them.
• Don't forget debt and savings. Estimate how much you can put toward paying down debt and building up savings each month.

Step 2: Get organized

Plug in your monthly expenses in a dedicated notebook or spreadsheet. Categorize your cash under headings like housing, transportation, food and family obligations  Listing your expenses will help you to see where your money is going. To create the right budget for your needs you first should understanding where your money is going. To make sure your account for all your family's expenses, including seasonal and occasional purchases, create a budget worksheet with various categories for all your expenditures. Here are several common categories to help you get started.

Housing:

• Rent or mortgage
• Heating, cooling and electricity
• Public services, such as garbage or sewage
• Maintenance and yard work
• Furnishings

Transportation

• Car payments
• Gasoline and maintenance
• Auto repairs
• Auto insurance
• Public transportation and tolls

Family obligations

• Child care
• Education
• Child support

Entertainment and recreation

• Computer expenses
• Cable, videos and movies
• Hobbies
• Vacations
• Kids activities
• Subscriptions and dues

Health and Medical

• Insurance
• Out-of-pocket medical expenses
• Prescriptions
• Health and fitness fees

Food

• Groceries
• Restaurants and takeout

Pets

• Food
• Grooming
• Vet

Clothing

• Dry cleaning
• Purchases

Investments and savings

• Emergency fund
• 401(k), 401(b) or IRA
• College fund
• Savings

Debt payments

• Credit cards
• Student loans
• Other loans

Miscellaneous

• Toiletries
• Household items
• Gifts
• Donations
• Grooming products and services (haircuts, makeup)
• Allowance
• Taxes

Step 3: Make the numbers add up

Use one of these smart tools to subtract your expenses from your monthly income (include any rent, investment profits or alimony you receive):

• Bankrate.com: Search “free household budgeting worksheet” on this site to get a template with categories you create. Fill in the amounts, when the bills are due and how often you get paid and the calculator does the math.
• Excel: You most likely have this program on your computer but may not have ever used the Monthly Home Budget tool. Go to “Project Gallery” under “File.” Click on “Home Essentials,” then “Finance Tools” to find it.
• Pearbudget.com:  Try this program if you prefer to track your outlays without putting your bank information online and don’t mind inputting your receipts. It’s free for 30 days, then $3 a month.

Step 4: Develop a plan that fits your lifestyle

Maybe you are saving for something big (like a house to college tuition) or maybe you're trying to build up savings for the first time in your life; either way, learn to manage your money in a way that meets your specific needs. A budget should ease financial concerns. If it feels like a straightjacket, keep tweaking the plan until it fits. Just aim to spend less than you’re making.

Step 5: Stick to your plan

Avoid traps that can make budgets fail by following these simple rules:

• Be realistic. You might resolve to stop eating out, but for many busy women that’s not possible. Reduce your spending, but set aside the funds you need to get your takeout fix.
• View budgeting positively. If you think of money management as drudgery, you’re apt to let it slide. Consider it a tool that helps you make smarter spending decisions.

Article Courtesy of ALL YOU