How to Make a Proper Budget

Budgeting takes regular attention, but it pays off in the long term.
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A personal budget is an excellent way to bring order to household finance. It requires discipline and long-term commitment, but budgeting keeps the incoming and outgoing money clearly marked and organized so it is easy to tell how well the household is doing. Budgeting takes work, but no special tools or experience, just knowledge of the household's spending and income.

Making a Budget

Step 1

Track all household spending. It is important to know exactly how much money is leaving the household and where it is going. Divide spending into categories and put each expenditure into a category. This can be done on a weekly or monthly basis -- yearly is probably too infrequent.

Step 2

Track income. Whether that includes wages from jobs, investment income, sudden windfalls like inheritances, or other sources, keep track of all the money that comes into the household. This will help build an idea of the standard of living the household can afford.

Step 3

Set goals for the future. Potential goals are a big vacation, a new house, or just becoming financially stable. The idea of the goal is to provide long-term incentive for keeping track of the budget. The goal gives focus and a clear reward for sticking to the system.

Step 4

Make the goal attainable. By trimming spending and increasing income, build up enough money to achieve the goal. It takes discipline to keep track of spending and income, and more discipline to change your lifestyle to achieve the goal, but the reward is worth it.

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