Creating a Budget that You Can Stick To

Creating a budget sounds about as exciting as watching grass grow, but it is an important part of keeping your finances in order. Knowing exactly where your money is going each month will help you to develop a savings plan that will benefit you long term.

Maybe you already have a specific goal in mind. Maybe you know you want to purchase a larger home, or maybe you need a new car, maybe your floors have taken a beating and you need to replace them. Or maybe you just want to save for your retirement. Whatever your reasoning, it is always a good plan to be aware of exactly how much money is coming in and how much is going out.

  1. Get all your bills together. Start with the bills that are the same every month like your mortgage or rent. For bills that change from month to month see if you can come up with a monthly average so you know how much money you will need to set aside each month. The more details you have the better.
  2. Write down all sources of income.
  3. Write a list of everything you expect to pay over the course of a month. This will include everything from your mortgage and car payments to the movies, dry cleaning, etc. Anything you plan to spend money on should be included in a preliminary list.
  4. Add both your monthly income and monthly expenses together separately. If you have more coming in than going out, you are in good shape and can develop a strategy to save towards your retirement or other long term goals. If your monthly expenses exceed your monthly income, you will need to make some changes.
  5. Start with the little things. Instead of buying a coffee every morning, make your own coffee at home. Work your way up cutting the little things that can be cut. Start with the least painful and move up as needed.
  6. Review your budget on a monthly basis. Try writing down everything you spend and adding it all up at the end of the month. This will give you a better idea of what you can afford to cut back on.

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