Creating a budget can be overwhelming, but it’s important to list all monthly income and expenses. A basic budget should have columns for income, necessities, and unnecessary expenses. Determine how much should be spent on each item, and consider using a computer spreadsheet or budgeting software.
The beginning of the budgeting process can be daunting, especially when people are afraid of math or basic accounting tools. To begin this process, you should list all income and expenses that occur on a monthly basis. A basic budget will have income listed in one column, necessities in another, and unnecessary expenses in a third column. In each of these columns, the corresponding numbers from your checkbook or bank statement are written. Using this background information, the budgeting process can then begin in earnest.
List all personal income earned in the first column of the basic budget worksheet. The most conservative budgeting process is to list only regular, repetitive income earned in jobs or other regularly paid activities. Income should be net of any periodic taxes or deductions withheld from your paycheck.
The next column contains the expenses of necessity. Necessities expenses include any items you need to pay to maintain your basic cost of living. Housing, utilities, food, clothing, car payments, and similar items are necessities.
When planning your budget, you should list all non-essential regular cash flows. This allows you to determine how much income you spend on sundries, such as eating out, personal items, or vacations and travel. Many of these items are typically one-time expenses. As you begin the budgeting process, however, you’ll see that every little expense can quickly add up and result in bigger cash flows.
After completing the basic budgeting worksheet, begin determining how much should be spent on each item. Many home budget resources provide a base percentage level for different expenses in a personal budget. For example, housing should be up to 35% of total income, 20% for car payments, 15% for food, and so on for any necessary expenses. This provides a basis for comparing current budget spending to suggested levels of standard spending levels.
Budgeting can be easier when you use a computer spreadsheet or specific budgeting software program. This allows you to simply enter information and set your budget based on your specific lifestyle, income level and ongoing expenses. The software can also provide the ability to print the budget. This allows you to keep paper records to help prepare your taxes or provide information to lenders. Starting small and working into a more complicated system can also make it easier if you’re concerned about how to start the budgeting process.
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