“If you don’t know where you are going, any road will get you there.”

– Lewis Carroll

 Do I Need A Budget

Do I Need A Budget?

  • Do you find yourself frequently saying, “I don’t know where all the money goes”.
  • Do you lose track of which bills are due and which ones have been paid?  “Did I remember to pay the electric bill?”
  • Do you have “freak out” moments when you check your bank balance online – why and where did I spend $200.00?  On the other hand, maybe you get a bigger surprise and there is no money, somehow it’s all been spent!

If any of this hits close to home, you need to make a budget!


Living without a budget is similar to traveling across the country without a roadmap.  While both can certainly be accomplished, the end-result is usually expensive, frustrating and wasteful.


Some people feel making a budget is unnecessary and too restraining, but according to The Millionaire Next Door, budgeting is the one thing that sets the wealthy apart from the rest of us- 55% of millionaires have grown their financial wealth by adhering to a strict budget


Learning to stick to a budget and seeing the results will change your understanding of money.  Instead of spending impulsively, you will come to value money and use it as a tool to reach goals and fulfill needs.


A budget is a helpful tool that will track all of your financial information at a glance, how much money comes in and how much goes out.  Not only will a budget organize your finances and pinpoint ways to save money, it will pay dividends in ways you’ve never imagined.


What Are The Benefits Of A Budget?

Most of us would like to be able to manage our money more efficiently.  After all, money is indispensable and doesn’t come easy; we work hard for our money.  This is where a budget comes in.


A budget used correctly, will help you see where your money is going, help you get more utility out of every buck, and help you save some extra for future use.


If you are surviving in the paycheck-to-paycheck cycle or you don’t have a clue where your money goes each month, a personal budget is just the ticket to help you get ahead and improve your financial outlook.


Budget Benefits:

  •  Tracks Your Monthly Spending – You’ll see where your money really goes.
  • Tracks Your Monthly Income – Compares what’s coming in with what’s going out.
  • Manages Bill Payment – Know exactly what needs to be paid and when, so you can avoid late payments.
  • Eliminates Debt – Get out of debt faster, helps you know where to cut expenses.
  • Builds A Cushion Of Savings – Shows you where you can divert funds to build an emergency fund.
  • Helps Reach Goals – Helps you plan for future expenses, such as buying a new house, a new car or prepare for retirement.


Budget Benefits Choose Poverty Or Wealth


How to Make A Budget That Works

Step #1:  The Road To Riches Is Paved With Goals

One of the most important secrets to successful budgeting is to have a goal that inspires you so much it causes a mental shift in your thinking and attitude.  Let’s face it, if you don’t have a reason to make sacrifices, to work hard—it will be easy to fail.


Start by asking yourself what you want to get out of this.  Do you want to buy new bedroom furniture or a big screen TV, a new home or travel?  What would life be like if you were totally debt free? Explore, Visualize and Get Excited!


Choose goals that are personal and mean something to you, let them breathe life and determination into your plan.  Incorporate goals that will guide you and keep you strong when the going gets tough.


You need to be filled with a burst of energy and passion that fractures your comfort with debt and incites you to action.


Find one or two goals that will drive you to succeed and keep you focused.  Write them down; commit; make a vision board and keep it in your line of vision so you’ll be reminded daily.


Alternatively, you may want to use online tools like 43 things, Joe’s Goals or StickK to help you stay on track.


Now you’re ready to shape a budget to best serve your goals and needs.  With clearly defined passionate goals you will have increased your likelihood of success.


Of course there will be setbacks along the path, screw ups, mistakes; stuff happens, just have a plan in mind to cope with problems before they come along.


 Step #2:  Determine Your Household’s Monthly Income

Gather as many financial statements and bills as you can.  This includes bank statements, investment accounts, pay stubs and recent bills, everything that is related to a source of income or an expense.  You will be creating a monthly average of expenses and income, so the more information you can dig up the better.


With your financial information together find and list all sources of income.  Collect a month’s worth of pay stubs and list the net or take-home pay.  (Record this as a monthly amount.)  Some people like to track their gross income and record the taxes and other withholding’s.  Use which ever method is comfortable for you.


Don’t include overtime or bonus pay when setting up your budget, its money that isn’t available on a monthly basis.  When unexpected money comes in you can use it to pay extra on debt or allocate it to other areas of the budget such as savings.


Also be sure to list other sources of income; child support, social security, tax refunds, rental income, royalties, interest and dividends, etc.  You get the idea.


Step #3:  List Every Penny You Spend Monthly

The next step is to figure out where all that money goes.  Be Brutal!  Be honest!  Be Thorough!  No Fudging Allowed!  It’ll most likely sting and hurt a little, but you’ll end up with a more realistic budget.


Categorize Expenses into Fixed and Variable:

Compile a list of your fixed expenses like mortgage or rent, auto loans, student loans, insurance payments, anything that is generally the same payment amount month after month.


Next list your variable or flexible expenses such as utilities, credit accounts, groceries, gasoline, clothing, entertainment and other expenses that come up throughout the month; at first you may have to guess just make adjustments as you go along.


Try to reconstruct your movements throughout the month.  How much did you spend for your daily caffeine fix?  Did you buy the daily newspaper or magazines?  How many times did you eat out during the month?  Add them to the list.  These $2 or $5 purchases can easily add up to more than $5,000.00 a year.


Only when you have a list of all the places your money goes will you fully understand your spending habits and be able to identify areas where you can make changes.


Step #4: Mapping Your Future

There are no set rules about the structure of a budget, but most people set it up in sections or headings.  Organizing your budget in sections will make it easier to read, easier to find specific information and easier to update and maintain.



How To Make A Budget


Creating A Budget:

Think of a budget as a roadmap to your finances, a “spending and savings plan” that will help you reach your goals and live the dream.  A budget should show you how much money you have to work with, where it needs to go, and how much, if any, is left over. The left overs can go towards building an emergency fund, savings or paying extra on bills to eliminate debt faster.  At first you may not have any money left over, stay focused and you will.


  • Prioritize your expenses.
    •  Create your plan with your “needs” in mind first.  Then if there is room in the spending plan you can add some “wants or fun stuff”: budgeting isn’t about depriving yourself of all things enjoyable.


  • Pay Yourself First!
    • Make sure your written spending plan allocates money to a savings account each month; the amount is not as important as establishing the savings habit-even a small amount can make a big difference over time.  Remember the power of a penny.
    • Saving is an important part of protecting yourself and your family.  With the way the world is these days you never know what tomorrow will bring.  It’s better to be prepared than to be caught with your shorts down.  Make it a priority to establish an emergency fund large enough to cover three to eight months of living expenses.
    • Once you have an emergency fund in place your savings can go towards other goals.


  • Total and compare monthly income to monthly expenses.
    • Your total expenses need to be less than or equal to your total income.  The ultimate goal is to have your income and expense columns equal.  This would mean all of your income is accounted for and budgeted for a specific expense.
    • If your expenses are higher than your income there’s a problem and some changes will need to be made.  Go back to the budget, review your entries and decide which expenses can be reduced.  Look at the variable expenses; this is usually where you can find areas to cut.  Adjust your budgeted expenses until you get closer to your income.


  • Track your results.
    • Monitor your budget regularly to make sure you’re staying on track.
    • After the first month compare your actual expenses to the proposed expenses.  This will show you where you did well and where you may need to improve.
    • Check your progress monthly to see how much closer you are to achieving your financial goals.  It is a powerful thing to see those balances drop or the savings increase.
    • Evaluate your plan often, does it still meet your needs and help you achieve your goals?  If not, make some adjustments to better serve your needs.  Don’t be afraid to change your budget; a good budget is always evolving.

As with all things Keep It Simple and Be Flexible.


Related Videos:

The Videos below show you how to use Microsoft Excel to make  a “Personal Budget and Income Statement”.  Click the lower right hand to enlarge the video to full screen.


1. Use Excel to Make a Personal Budget / Income Statement Part 1 of 4


2. Use Excel to Make a Personal Budget / Income Statement Part 2 of 4


3. Use Excel to Make a Personal Budget / Income Statement Part 3 of 4


4. Use Excel to Make a Personal Budget / Income Statement Part 4 of 4