Preparing a household budget involves figuring out where you spend your money, deciding where you'd rather spend it, and writing it down as a plan. Once the plan is in place you'll need to consciously track your spending and limit yourself to not spending more than you planned. When a personal budget is approached as a purposeful spending plan, you can eliminate debt and save extra for special purchases.
Write a list of everything you spend money on each month. Include bills such as cable and cell phone and general expenditures such as gasoline, clothing and tickets to the movies.
Write a dollar amount next to each item in your list to indicate how much money you spend in that area each month. Use old bills, sales receipts and your checkbook ledger to create close estimates for anything that isn't a fixed amount.
Combine items in your list that fit together into a more general category. For example, you can group together separate entries of shoes and jeans. Movies and dining out can be grouped into an entertainment category. Add the estimated spending amounts from each individual item to the broader category you put it in so that each general spending area has a combined total from the smaller items.
Add together all of the total expenses and compare that number to your total monthly take-home pay to ensure you're not spending more than you make.
Adjust the dollar amount listed for each spending category as needed or desired. For example, if you want to spend more on entertainment, then increase the amount assigned there. If you're already spending everything you make, you'll need to reduce money assigned to one category to increase the amount in another category.
Track everything you spend your money on and mark it with a corresponding budget category. After reached the spending limit you've set for yourself in a given area, don't allow yourself to spend any more for items in that category until a new month starts.
- DaveRamsey.com: Do Your Dollars Have Names?
- "The Total Money Makeover: A Proven Plan for Financial Fitness"; Dave Ramsey; 2007
- University of Maryland: It's Your Money: Making Choices
Kathy Burns-Millyard has been a professional writer since 1997. Originally specializing in business, technology, environment and health topics, Burns now focuses on home, garden and hobby interest articles. Her garden work has appeared on GardenGuides.com and other publications. She enjoys practicing Permaculture in her home garden near Tucson, Ariz.