Everyone needs money – it’s a fact of life. Finding a job and earning money is only half the battle. Once you have a regular income, that income must be managed. Managing money effectively can be very difficult, but it can be done painlessly on a budget. Simply put, a budget is a plan for managing your money wisely.
Before making a budget, it is a good idea to sit down and think about your expenses or what you are spending money on. Expenses are things like food, rent or a mortgage payment, transportation, utilities, clothing and entertainment. You may find that you need to keep a current list of your expenses throughout the month to accurately determine where your money is going. While it may take time and effort, it is worth it. Once you have a list of how much you spend, make another list of how much you earn. You are now ready to budget.

Start by recording your monthly income at the top of a piece of paper. A person’s income is usually just their paycheck or salary, but that includes all the money you receive regularly throughout the month. Since income is generally fixed or does not change much, the job of budgeting is to allocate that money to expenses. Then figure out what expenses are fixed necessities, things you pay the same amount for each month that won’t change. These are things like paying for a car, rent, student loan, etc. List them and deduct the amount needed for each item from your income. Now think of other necessities like food, utilities, gas, etc. which may vary. Realistically estimate how much you spend on each of these things. Then write them down, also deducting each amount from your income. The amount after deducting your fixed and variable needs from your income is the amount of money you can spend on unnecessary items, such as dining out, entertainment or traveling.
What can you do if you run out of money on your income before you prepare to budget for your unnecessary assets? You cannot change your fixed expenses. So reconsider your needs which are not fixed expenses. Is there a place where you can spend less money? Is there something that isn’t really a necessity, like eating out? Can you reduce bills for things like utilities or transportation costs by using them less? These are questions that only you can of course answer. By looking at where your money is going, you are better informed to decide where and how to spend it.
The next difficult part of making a budget is sticking to it. Once you’ve decided where your money should go each month, try to keep it that way. Pay your essential bills first, then if you are on budget, use the remaining money for non-essential items or to save money. By carefully looking at where your money is going and staying on a budget, you will be surprised how financially responsible you can be.