When you create a monthly budget, you're creating a map for your money that can help guide you in the direction of financial freedom. To progress along this path, you need to first figure out where you're starting from by taking a close look at your spending habits in relationship to your income. By instituting small changes, you will find it easier to stay on track each month so that you never have to get nervous about your finances toward the end of a pay period.
Order your free annual credit report online through the Federal government's Annual Credit Report website (see Resources). Your credit report factors into creating your budget because your credit score is such an important part of your financial portrait. If your credit score is low, you will know to allocate more money to paying down your debt.
Keep a journal of your spending for at least one week. Make sure to jot down everything you spend money on, including small purchases like magazines and MP3 downloads. At the end of the week, break down your spending into categories so that you have a visual understanding of how much you're spending on things like groceries, entertainment, impulse purchases, transportation and hobbies.
Add your week-long spending journal total to all of your recurring bills, such as utilities, cell phone and credit card payments, as well as membership fees. If you're feeling a pinch at the end of each pay period, you'll see why by juxtaposing your income and spending. You should have enough to feel comfortable making a 10 percent contribution to your savings account, and you must make room to pay higher than the minimum payments on your credit cards.
Look at where you can cut back or make changes to save money. Making small changes will have a big impact on your spending each month. If you love books, you might consider using the local library or joining a book swap program online. If you enjoy movies, rent them online or at a machine (many rent for as little as $1 per night). Make your coffee or bring your lunch to work a couple of times a week rather than going out every day. When you find different ways to continue enjoying the things you love, it's far easier to stick to a budget.
Continue to adjust your budget. The first time you create a budget, think of it as a draft. As you live with your initial budget, you'll likely have to make adjustments to fit your actual lifestyle. Keep a log of your spending to track how closely you're sticking to your road map, but don't beat yourself up if you go a little off-track.
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.