How to begin budgeting?

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Creating a budget can be overwhelming, but it starts with listing all monthly income and expenses. A basic budget should have columns for income, necessity expenses, and non-necessary expenses. It’s important to list all regular cash outflows, including non-essential items. Household budget resources provide a baseline for necessary expenses. Using a computer spreadsheet or budgeting software can make the process easier.

Starting the budgeting process can be daunting, especially when people are afraid of math or basic accounting tools. To begin this process, you must list all income and expenses that occur on a monthly basis. A basic budget will have income listed in one column, necessity expenses in another, and non-necessary expenses in a third column. In each of these columns are written the corresponding figures from your checkbook or bank statement. With this basic information, the budgeting process can begin in earnest.

List all earned personal income in the first column of your basic budget worksheet. The most conservative budgeting process is to only list normal, recurring income earned from jobs or other regularly paid activities. Income must be net of all taxes or regular deductions withheld from paychecks.

The next column contains necessity expenses. Necessity expenses include all items you must pay to maintain your basic cost of living. Housing needs, utilities, food, clothing, car payments, and similar items.

When budgeting, it is imperative to list all non-essential regular cash outflows. This allows you to determine how much income you spend on miscellaneous items, such as dining out, personal items, or vacations and travel. Many of these items are often one-time expenses. However, when you begin your budgeting process, you’ll find that every little expense can add up quickly and result in larger cash outflows.

Once you’ve completed your basic budget worksheet, start figuring out how much to spend on each item. Many household budget resources provide a base percentage level for different expenses in a personal budget. For example, housing should be a maximum of 35 percent of total income, 20 percent for car payments, 15 percent for food, and so on for each necessary expense. This provides a baseline to compare your current budget spending to the suggested levels of standard spending levels.

Budgeting can be smoother when you use a computer spreadsheet or specific budgeting software program. This allows you to simply enter information and set your budget according to your specific lifestyle, income level, and current expenses. The software may also provide the ability to print the estimate. This allows you to keep paper records to help prepare taxes or provide information to lenders. Starting small and working through a more complicated system can also make it easier if you’re worried about how to start the budgeting process.

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