11/09/2010

How to Create Your Budget

The first thing that anyone who wants to make a budget must do is to compare their income versus their expenses. The good thing is that it is easy to do. It's as simple as that expenses that are greater than income are bad, and income that is greater than total expenses.

There are two rules to a simple budget. 
  1. You can’t spend more than you earn – carrying a balance on a credit card is not allowed.
  2. Money must go to the budget categories as soon you get paid
Remember: 
  • Track where your money is going: Look at where your money is going over the course of a week or a month.
  • You also need to make a list of expenses that, while not regular monthly bills, occur periodically and must be accounted for. 

Make choices and consider the structure of your budget. Most pre-designed systems are designed on a monthly budget cycle.

Rather than having twenty or thirty different categories, focus on the main ones. A sample of this would be as follows:

Monthly Budget:
$3000 per month
Net income (income after withholding) $2160

Housing: $800
Utilities: $300
Groceries $500
Emergency: 120
Medical Insurance and transportation: $100 
Other Credit: $100
Misc. Expenses: $50
Entertainment: $20
Savings: $20

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