Budgeting Made Easy:

What You Need to Know

Step 1

List all sources of monthly income including gifts, bonuses, tax refunds, cost of living increases, dividends, and interest income, etc.

Use the Income Worksheet in this booklet to keep track of your income.

Step 2

Separate expenses into three categories: fixed, flexible, and discretionary.

Use the Credit Card and Expenses Worksheets in this booklet to keep track of your expenses.

Fixed expenses remain the same each month. Examples are rent, car loans, insurance premiums, etc. Add up all fixed expenses.

Flexible expenses are items for which you control the amount spent. These include household and grocery items, restaurant expenses, utilities, entertainment, out of pocket expenses, etc. Add up all flexible expenses.

Discretionary expenses are items that are not necessary for survival. If you are spending more money than you earn, items from this category should be eliminated or cut back. Add up all discretionary expenses.

Step 3

Total all monthly expenses and subtract the total from your total monthly income.

Step 4

Divide your total expenses by the frequency of income or the number of paychecks the household receives each month. (For example: $1,500 in expenses divided by 4 paychecks = $375 needed per paycheck to pay for your expenses.) If the expense total is greater than the income total, you need to decide what steps you can take to reduce your monthly expenses or to earn additional income.

Step 5

Prioritize your expenses. Keep track of when you use credit cards. Then ask yourself if you want to borrow every month for these expenses.

You should set aside enough savings each month to cover fixed and some flexible expenses. By reserving your funds in this way, you can avoid living from paycheck to paycheck.

Review your spending plan each month, 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.

NOTE: Before using the following Worksheets, please make 12 or more copies of each of them. This will allow you to keep track of your budget for the entire year and will permit you to make necessary adjustments in your income, expenses, and priorities.