Preparing to Make a Budget

The first step in making a budget is to find out your current state of your finances.  Most people don’t have any idea where their money is going and that can be a dangerous thing.  If you don’t know where you are spending your money, you won’t have any idea where to start cutting back and therefore saving money.

First of all, figure out what money you have coming in.  This may be wages from a job, social security, disability, child support or any other number of sources.  Make sure to figure out the amount of money after taxes (or net amount).

Secondly, spend about a month keeping track of your expenditures.  Make sure you are keeping track of all expenditures – whether paid for by cash, debit or credit card.  If you don’t have a lot of time, you can keep your receipts together and log them at the end of the week.

Here are some guidelines for budget categories:

• Housing (Include rent/mortgage and utilities)
• Food (Groceries and meals out)
• Auto (Car payments, gas, oil, maintenance)
• Insurance (Car, home, life)
• Debt (Make sure you know who you owe money to)
• Entertainment (Movies, books, magazines)
• Clothing
• Savings
• Miscellaneous (Try not to put too much into this category)
• Child Care (If necessary)

Once you have this information you can start to see where your money is going and start readjusting your spending habits.  I’ll show you how to start your budget in a future entry.