Budget Basics
Creating Your Budget
The Step-By-Step Implementation Of A Spending Plan
Step 1
Print Consolidated's
Income Worksheet
When combating a tidal wave of
debt the first step is to list all sources of monthly income including gifts,
bonuses, tax refunds, cost of living increases, dividends, and interest
income, etc.
Step 2
Expenses are separated into
three categories: "fixed", "flexible", and "discretionary".
Print the Credit
Card Debt Worksheet to add up all you credit card debt.
A fixed expense is one that
remains the same each month, such as a mortgage or rent, a loan payment,
insurance premiums, etc.
Total-up all fixed expenses.
Flexible expenses are items
that you control the amount of money spent.
These include household and
grocery items, clothing, utilities, etc.
Total-up all flexible expenses.
Discretionary expenses are items
that are not necessary for survival. If your expense to income ratio is out of
balance and you are spending more money than you earn, items from this category
should be eliminated or cut back.
Total up all discretionary expenses.
Step 3
All expenses are totaled and
then subtracted from the total income figure for the month.
Print the Expense
Worksheet
Step 4
Next, divide total expenses
by the frequency of income or the number of paychecks the household
receives each month. This will tell you how much money to set aside each
paycheck. If the expense total is greater than the income total, you are
off track financially.
Step 5
You must begin to prioritize
expenses. Keep track of when you use credit cards. Then ask yourself if
you want to borrow every month for these expenses.
Each month, enough savings
should be set aside to cover fixed and some flexible expenses. This reserve
method will save you from living paycheck to paycheck.
Review the spending-plan each
income period to start. At the end of each month, compare actual expenses
against what you budgeted. As time passes, you may want to only perform this
comparison on a quarterly basis.
