Developing your budget (or spending plan)

Now that you have decided to start living on a budget, you need to gather all the tools necessary to get the job done. In its most basic form a budget is simply a list of how you are going to spend or allocate your financial resources. Your money. That is is. It does not need to be complicated or overly detailed. As a matter of fact the first rule is the KISS principle

Keep It Simple Stupid

Before you get upset, I am not calling you stupid. However, if you fail to develop and maintain a working budget because your final product required a CPA to understand it, well, that would be stupid. The first step is take a piece of paper and write down how much income you will be receiving this month. Below that start ‘spending’ or allocating all of your income, until there is nothing left. When you have no more money to allocate you are done. You can’t get much simpler than that. If you want to use a form that has already been “tested” feel free to download one here. This form is a modified version of the one Dave Ramsey offers. His is three pages, the modified one is only two pages.

If you feel comfortable using the computer you can use a spreadsheet program like Microsoft Excel or a software package like You Need A Budget. The most important thing is that it be something you will use.

Get your priorities in Order

What happens when you get to the end of the money, before you get to the end of your list of items that need some money. Great question! Big problem! If your living expenses and debts are greater than your monthly income, you will need to make some decisions. Either increase your income (part-time job, yard sale, etc) or decrease your spending.

Do you have to have cable? What about the daily $5.00 cup of coffee? You need to go back up your list and find areas where you can decrease your allocation. Maybe cut back on groceries or cancel magazine subscriptions. Can you walk in your neighborhood and cancel the gym membership? Whatever you decide to do, the most important thing is to put your family first. In the next article we will look at prioritizing your budget around taking care of your family.

• Learning to Live on Less Than You Make
• Prioritize Your Plan Around the Four Walls
• YNAB – Online Course – Day 5
• Why can't you save any money?
• Feeling Poor?

• 5 Things to Do to Build Wealth in Your 20s
• FamZoo: a great tool to teach your children how to handle money
• Kids Can Make Money Too! : How Young People Can Succeed Financially--Over 200 Ways to Earn Money and How to Make it Grow (Paperback)
• Cheapskates, 2005
• Reader Question - Do You Ever Spend Money On Anything?