How to make a budget

Sunday, January 04, 2009
Economic survival guide: How to make a budget
Trying to cut expenses or squirrel away some savings? First you need to know what’s coming in
and what’s going out.

By Rob Johnson | The Roanoke Times

Make a commitment
Underscore to family members how serious you are about
adhering to the new financial guidelines. Don’t merely print a
spreadsheet of the family’s income and expenses and then
wordlessly post it to the refrigerator under the kids’ soccer
schedule.

List your expenses
Make a realistic list of your expected monthly expenses based
upon actual expenses a year ago. Be sure to include new expenses,
such as car payments that didn’t exist a year earlier. And don’t
forget impulse purchases, such as stopping at a convenience store
for a snack and soda, said Tanisha Warner of Consumer Credit
Counseling Services in Roanoke. Those can add up big over the
course of a month.

List your income
Make a list of your net monthly income. Compare your income
and expenses. Living on a budget means keeping expenses within
your income.

Classify your expenses
Divide expenses into different categories: the absolutely
necessary; the absolutely unnecessary; and those that can be
trimmed. Reduce spending in the latter two.

Plan ahead
Plan your spending one month ahead. After you get the hang of it,
plan several months ahead. Ideally, you’ll gradually be able to
increase the gap between income and expenses so you’ll have
more income left over each month.

Pat yourself on the back
Reward thriftiness. Rather than saving every bit of your trimmed budget, devote a portion to new
spending. For example: $5 less in electric bills for six months is $30, enough to cover several Saturday afternoon movie matinee tickets. This can help encourage you to save more in the future.

Review and re-evaluate
Go back to Step 1 and review every item and the monthly totals of your income and expenses.
Remember that a budget is a projection based on past history and honest expectations. Your budget should show a surplus of income, and one goal should be increasing that abundance.