How do I Create a Financial Budget?

Grocery shopping and cooking instead of eating out are healthy for your budget.

Grocery shopping and cooking instead of eating out are healthy for your budget.

To save money and keep yourself free of debt, it's vital to create a budget. Creating a budget is a matter of three simple steps: figuring out what you're spending money on, creating guidelines for your spending and making sure that you stay within those guidelines. Like a diet, it's not realistic to hold firmly to your budget every month, but having guidelines will help you to think twice before spending.

Step 1

Track your spending for a week. Using a small notepad (or a smartphone with note-taking abilities, if you're so technically inclined) write down every single thing you purchase for a week. At the end of the week, divide your spending into categories, such as entertainment, groceries, bills and transportation. You might be surprised to find that your daily mocha is setting you back more than expected.

Step 2

Use the log you created to project how much you spend in a month, then see where you can cut back. For each of the categories you created, look seriously at how much you're spending on things you actually need to survive as opposed to things you just want. Money spent on electricity, water and rent are needs; going out to dinner and having a glass of wine each time is not. However, be realistic in setting your budget guidelines and leave a little room for doing the things you enjoy. Use this time to budget in savings of at least 10 percent of your income.

Step 3

Keep a spreadsheet of your spending or use budgeting software to keep yourself on target with your budget. When you can see how you're using your money, you become more mindful of your spending. As you track your spending over time, you will be able to make adjustments as necessary.

Step 4

Find ways to enjoy cutting back. Financial guru Dave Ramsey says that the secret to saving money is focused emotion. To better gain that focus, find new ways to do the things you love or get the things you want. Join a book swap program instead of buying new ones, hold a clothing exchange party instead of shopping, start cooking with your partner instead of going out to eat or take a vacation in your own city rather than fly out of town. Without deprivation, a budget stops being restrictive and becomes a way of life.

About the Author

Joy Uyeno has been writing about travel, food, fashion, culture and finance since 2005. For three years she wrote a column for the "Honolulu Star-Bulletin" aimed at young and first-time travelers. Her writing has appeared in several local and national publications, including the 2008 anthology "Honolulu Stories." She holds a Master of Arts in writing and publishing from Emerson College.

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