Steps to Building a Budget by Elizabeth Dargis

Many people procrastinate on making a budget because they are unsure of the process of creating one. I will take you step by step and by the end you can have your own personal budget.

Step 1: Get a small notebook to take with you. In it write down everything you buy for at least a month. Up to three months if you'd like. I was shocked to see how much our family spent on little stuff like vending machine purchases and magazines. I found that most of our money wasn't being spent on big things, but the little, "Oh, what's three dollars here or there."

Step 2: After your time period is up, analyze your spending patterns. Put all your purchases in categories like groceries, entertainment, etc.

Step 3: Now separate those categories into two categories: Fixed Expenses and Variable Expenses. Fixed are things like Rent and Insurance. The variable expenses are all those that you have in your power to change like groceries, utilities and clothing.

Step 4: Add up all the expenses in each of the categories. Write down the totals for each. i.e. Phone: $58 a month

Step 5: Add up all your income for the month. Then add up all your fixed expenses. Subtract your fixed expenses from your income. Income: 3,000 -2,100 fixed expenses =$900. The result is what you have left for variable expenses.

Step 6: Now you can spread the leftover money into your other categories. Keep in mind yearly expenses like taxes. Consider putting 10% into savings. Take a look at where you can cut down. Enter the amount you have decided to spend in each category on your budget worksheet. And now you have a sanity saving budget.

Step 7: Keep track monthly of what you spend in each category. I use Mvelopes Personal to do that. Readjust your budget if you need to. Only you know where your spending priorities are.