How to Make a Budget

If you have too much month left at the end of your money, it's time to get your finances under control by creating a budget. Gather all financial information regarding your income, such as net wages, tips, interest on savings and child support. Then list all expenses. After adding these up, you should have an idea of how much is coming in and going out. Identify fixed expenses such as rent or mortgage payment, taxes, utilities, and insurance premiums. Then for at least one month, track all expenses down to the penny. Keep a small notebook with you in which to record this information.

If your expenses are higher than your income, you need to take a hard, honest look at your spending habits to see where you can cut back. Your variable expenses such as food, entertainment and utilities will be the easiest place to start. Using those savings to help eliminate debt such as car payments or credit card debt should be a priority. A favored method is to 'snowball' debt repayment by making minimum payments on all but your smallest amount or highest-interest debt. Once that debt is repaid, roll the amount you were paying into the next smallest amount or highest-interest debt, in addition to the minimum payment.

Don't forget to budget for savings. Having an emergency fund will prevent you from being forced to go further into debt for unexpected expenses such as car repairs. It's never too soon to start saving for retirement or your children's college expenses. It's smarter to save up in advance for big things like vacations or a new car instead of going into debt for them.