Initial Budget Creation And Usage

As I’ve said before, budgeting is a very important part of good financial health.  While you don’t have to take it to extremes, I believe that having some form of budget is vital.  In this installment during budget week, we are going to go through how to set up a monthly budget so that you can see where your money goes and figure out how you can cut down.

Please note that today I am referring to what is known as a predictive budget, not a retroactive.  Your expense grid will tie in at the end of the week – for now we’re going to look at your anticipated expenses.

The first step is figuring out how to do it and to keep track of it.  My preference is an Excel spreadsheet, but there are many options available to you:

Google documents offers a free personal budget form,
Microsoft Money
Quicken
And so on.

Each has different options; you can find a review of some of them here. Pick the one that works for you!

The budget process is simple, especially if you’ve already prepared your expense log.  Break out your expenses into categories – rent, food, gasoline, and so on.  What do you think you spend on these every month?  Layout a basic prediction of what you think you’ll spend next month.

Obviously, this is easier for some categories than others.  Your monthly housing expenses probably won’t be any different this month than next.  The same applies to all of your Fixed Expenses. Your Discretionary Expenses may be a little more difficult to predict, but overall you should have a decent idea of what you spend in a month.

There’s no need for overly complicated budgeting.  Simply put down a number that you think is reasonable in each category.  Don’t expect to be perfectly accurate, or even particularly close in the first month – financial planning and prediction isn’t that easy!  Over time, you will develop your budget more and it will become an increasingly valuable tool in your financial medicine cabinet.

Tags: budget activities, Budgeting, expense log, long term, tracking