For many people, budgeting is not a natural instinct. Instead, they spend their monthly paycheck until the money runs out. You can gain better financial control and meet your monetary goals by establishing a monthly household budget. Use your monthly salary as a starting point, and divvy up your income in a way that meets your needs but that also supports your lifestyle. While continual extravagant spending dooms nearly anyone to a busted budget, you may find you can afford occasional luxuries and still attain your financial goals.
Select a tool for recording your budget. You may prefer a simple sheet of paper, a notebook, a ocmputer spreadsheet or a budget worksheet, either in hard copy or online.
Assemble records of your various sources of income. For some people, a monthly pay statement covers their income, but others may have interest records, investment dividend statements, cash income, regular bonuses or gifts.
Total your monthly income or, if your income fluctuates widely, total your yearly income and divide it by 12 to arrive at a monthly figure. Use a net income figure that accounts for tax withdrawals and other deductions rather than a gross income figure.
Create categories for your bills. Typical entries include housing, medical expenses, groceries, personal items, tuition, insurance premiums, utilities, internet, phone, cable, home maintenance, gas, public transportation, car maintenance, clothing and debt from credit cards, student loans, personal loans and home equity loans.
Establish a monthly average for irregular expenses such as income taxes, property taxes, home insurance, holiday purchases, charitable contributions and vacations.
Give yourself a little leeway. Unless you have high-interest credit card debt, which should have the priority in your budget, you should create a miscellaneous category. Some people call this an "adult allowance." It allows for all the daily surprises and luxuries in life, such as lattes, cocktails, dinner at the new neighborhood spot, concerts, subscriptions, recreation and hobbies.
Set savings goals. Automatically transfer a dedicated amount or percentage of your salary to an interest-bearing vehicle such as a savings account or a money market account. Use this money to create an emergency fund and then save for other goals such as retirement, a sabbatical, an extended vacation, additional schooling, a down payment on a house or a college fund for family members.
- Look at budgeting as an ongoing process that you can adapt as your income or expenses change.
Nina Makofsky has been a professional writer for more than 20 years. She specializes in art, pop culture, education, travel and theater. She currently serves as a Mexican correspondent for "Aishti Magazine," covering everything from folk art to urban trends. She holds a Bachelor of Arts in English from Mills College.