What Is the First Step in the Master Budgeting Process?

To create an accurate budget, set up your document correctly.
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Taking control of your financial future might seem like an intimidating process if you’ve never done it before. Creating your first budget can also be a daunting task if you’ve never lived on one and aren’t sure what information to include. Unlike smaller budgets for special savings goals, a master budget puts all of your dollars and dreams into one document. To get the process started, get off the couch, gather last year’s financial records and start creating your budget document.

Gather Your Information

To effectively create a master budget, you’ll need to understand your financial situation. To determine this, gather all of your financial records from last year, including your tax return, bank and credit card statements, checkbook, online or brokerage trading statements and any other documents that will help you see what you brought in and spent last year. This will help you set spending and savings goals for the foreseeable future.

Create Your Document

Once you have your financial information, it’s time to build your budget document. Using a simple spreadsheet program, enter your income and expense categories down the left-hand side of the page. List all income sources, including your pay, gifts and money from any garage sales or part-time job you might take. If you plan on leaving stock market gains in your account, don’t include that in your master budget. List your expenses in two sections: fixed and variable. Fixed expenses include bills such as rent, car payments and insurance, while variable expenses change each month, such as your electric bill. Across the top of the page, create 12 columns for recording income and expense each month. After your December column, add “Total,” “Average Monthly,” “Budgeted Monthly” and “Projected Yearly” columns. At the bottom of each month, include lines for your total monthly income and expenses, and one to calculate your net income or loss.

Breakout Information

To get the most of your master budget, create a variety of breakout reports when you build your document. Use your “Total” column to learn what your average spending or income is each month. Divide that column by the number of months that have passed to get your entries for the “Average Monthly” column. This will let you compare what you are spending and saving to your “Budgeted Monthly” targets. Multiply the “Average Monthly” totals by 12 to get your “Projected Yearly” projection.


Once you have completed the first step in the master budgeting process, it’s time to use your document to plan your goals. Enter your projections in your “Budgeted Monthly” column to see if you will have enough money to pay your bills or save for specific goals. If you find you have excess cash, create savings categories and put them in your variable expenses section. For example, if you want to save $1,000 per month for your retirement fund, include that contribution as an expense in your budget. Other savings goals might include college tuition for your children, a mortgage down payment or a vacation. If your budget projections put you in the red each month, or living too close to the edge, start reducing the numbers in your variable expenses, such as dining out or entertainment.

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