How to Budget-Make One You'll Stick With

Having a budget lets you control spending, so you have enough money to pay your bills; as well as save for vacations, retirement and your children's education. But how do you go about figuring a budget? And what are things you can do to help you stick with the budget you've made? Here is a three step process to make the whole task easier.

Step 1: Collect the necessary information.

Get three months of pay stubs and figure your average monthly income. Then collect all of your receipts for one month in a shoebox. When you don't get a receipt for something like a soda at the convenience store, just write the date, time and amount on a piece of paper and put it in the box. At the end of the month, organize the receipts into groups-groceries, books and magazines, CD's and DVD's, snacks and drinks, entertainment, and so forth. Then make a list of your recurring expenses-telephone, oil, gas, electricity, water, mortgage or rent payment, insurance, cable or satellite TV, school fees and such.

Step 2: Assess your expense items.

Now compare your income and expense totals and figure out where you need to make changes. You want to alter your spending behavior to create a budget that stays in balance every month and starts to achieve your longer term financial goals. Put expenses into three categories.

Necessities-These are the expenses that can't be avoided such as mortgage, rent, utilities, insurance, etc. You can lower some of these costs by shopping around for better deals.

Candidates for reduction-Things like groceries, entertainment, haricuts, etc., are necessary costt that can be easily trimmed to fit your budget. There are less expensive alternatives for many grocery items and outlets that offer lower prices. Children's activities need to be budgeted and sometimes you have to limit the number they're involved in.

Expendables-Sometimes you have to forego luxury expenditures in the short term to pay off debts or reach long term savings goals. Fancy clothing and jewelry, meals at pricey restaurants, pay TV, CD's and DVD's, even magazine subscriptions can be cut from the budget or made to be just occasional treats.

Step 3: Write it down and start following it.

Choose a budget spreadsheet format or software you can work with an fill it in with allowances for each category. Be realistic, don't try to trim a $200 per week grocery budget by 40% overnight. Make sure you allocate funds to pay off debt and build up savings. Give yourself motivation with a specific short term goal, like cutting your grocery bill 10%, and a long term goal like eliminating credit card debt in the next 18 months.

After following your budget for a month, re-examine it and make needed adjustments. Then follow the revised budget for three months and look at it again. If you need help, don't be afrraid to ask a friend or family member who may be more financially organized than you are.

Money management doesn't come easily to everyone. But anyone can do it who wants to get the most out of their money.