How to Create An Effective Personal Budget Plan

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The first step is to itemize all expenses. This should include rent or mortgage payment, utilities, insurance, car(s), credit card (s), gas, food and any other outgoing expense you have. It’s important that you list everything and not leave anything out. Otherwise, you will not have a clear indication of what your total exposure is for each month.

For your next step, it’s easiest to use a spreadsheet program if you have one. If not, you can download a free version at You’ll now list expenses in column A along with payment amounts in column B. Once you’re done listing everything, simply add all amounts to give you your total monthly expense amount. Now take the total amount of each expense and divide it by the number of pay periods per month. This will give you a weekly or bi-weekly expense budget for each item. For instance, if you have a food budget of $250.00 per month, you simply divide by 4 (if paid weekly) to give you a total of $62.50. This is the amount you will spend each pay period. You must do this for each expense (and stick to it) if you want to successfully utilize your budget. You can take this one step further and list actual amounts for each week in a separate column. Considering there are different due dates for different bills, you’ll want to consider that as well to avoid late paymentsmag-glass_10x10.gif as well as late fees. Once again, a spreadsheet program will help tremendously and you can make adjustments as you approach the end of each month to always have a present day snapshot of where you stand.

There are a number of different things to do at this point depending on what your financial situation is. If you have money left over and you happen to have little to no debt, you should start considering investing in an emergency fund. If you have one established, you should be contributing towards your retirement and college savings plan if you have children. If you have quite a bit of debt, now would be a good opportunity to start thinking about eliminating that debt. I prefer a “Snowball” method to eliminating debt which is simply paying off bills smallest to largest. You can get more information at His 7 step method has worked well for many people and may help you as well.

Let me finish by saying that you may not have much left over after paying your monthly bills. Worse yet, you may find yourself being upside down and have more going out than coming in. If that’s the case, you need to take action to determine where you can cut back. If you’re renting, maybe you can find a cheaper place to rent. Also, seriously analyze your spending on groceries, gas, electricity, insurance or any other areas you might be able to cut back on. There are many good web sites that offer tips and advice on how to save in these areas. You should also check out message boards such as or There are many others like these that provide good, sound advice.


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