Make a Budget

These simple tips will help you make a budget quickly and easily.

The first step to organizing your finances is to know your household budget, but creating a budget can be overwhelming. It doesn't have to be.

Follow these steps to create a simple budget. Whether you want to create a family budget or a personal budget, you won't believe how quickly and easily you can do it.

Step one

Write down how much money you bring home each month. When you are calculating your income, always round down.

Example: If your take-home pay is $932.00 every Friday, calculate it as $900.00 per week for a total of $3,600.00 per month.

By rounding down your income, you are building what I refer to as a cushion. Your cushion is the money that can be used for those unexpected expenses that pop up throughout the month - birthday gifts, car repairs, etc.

Using the example above, you are building a $128.00 monthly cushion into your budget just by rounding down your income.

Step two

Write down all of your recurring monthly expenses. When you are calculating your expenses, always round up.

Example: If your mortgage payment is $978.00 each month, calculate it as $1,000.00 - building an additional $22.00 into your monthly cushion.

Round up for all of your monthly expenses and watch your cushion grow!

Step three

Subtract your total monthly expenses (after rounding up) from your total monthly income (after rounding down). This is your excess monthly income, not including your cushion.

Your excess income is the amount you need to look at to determine whether or not you can comfortably afford to take on a new expense.

Wasn't that a quick and easy way to make a budget?

Click here to download a free budget worksheet in PDF format

I am a big fan of making charts and posting them where they are a visible reminder of your goal.

Turn your budget into a chart. Make one row for each monthly expense and one column for each month of the year. Check off the expenses as you pay them each month. You will know at-a-glance where you stand financially at any point during the month.

You can also write your personal budgeting goals on the bottom of your chart as a constant visual reminder of what you are trying to achieve. Things like "pay off the car this year" or "save enough for a vacation" are great motivators to stick to your budget.

Always consult your budget before making a purchase and don't buy it unless you can afford it!