Personal Finance

A nitty-gritty guide to making a budget

| August 27, 2014

Mortgage payment, $765. Utilities bill, $90. Unexpected car repair, $110. Extra money at the end of the month, $0.

If you constantly wonder what happened to your paycheck, coming up with a budget may eliminate some of the guesswork and change that $0 figure into something a bit larger.

But developing a budget means you have to know exactly how much money you have coming in each month and how much you’re paying out toward bills and other expenses. Although this task takes some time and effort, the result may be better control of your finances.

The Steps:

1.   To create a budget for the future, you have to examine your past. Start by looking back through your check registers for the last year. Make a list of all the places your money went — mortgage or rent, utilities, phone, cable TV, food, insurance, taxes, entertainment, car and home repairs, and so on.

2.   Make a list of all your income sources.

3.   Write down all your deposits over the past 12 months.

4.   Write the monthly payment next to each expense category. For variable expenses such as food and utility costs, find the average cost over a certain time period. For semiannual or annual expenses, divide by six or 12 to get a monthly cost.

Develop a budget based on these figures, comparing them to your actual expenses over the next few months. If there’s a difference between the amount you budgeted for an item and the amount you spent, adjust your budget or find a way to reduce spending for that item.

This article was reprinted from a First Command Financial Services publication.

One Response to “A nitty-gritty guide to making a budget”

  1. The setting up of a personal finance blog for military service members was an excellent idea and must be of great assistance to families, particularly at times when one partner is left behind whilst the other is on duty overseers. It’s essential to have a budget in place in any case and a great exercise in working together and mapping out a financial plan for the future. I’ve written a couple of posts myself on the topic of budgeting for couples. One on how the issue should be approached and another on how to draw up a simple household budget. That post contains a simple free spreadsheet that I named “the get out of jail budget” and can be read here: Well done to you for taking care of the troops and their families.

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