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The number one tool for saving money, getting out of debt, and building wealth, or accomplishing really any financial goal, starts with one little thing- a budget. With this one simple concept a person will be on their way to living a life free from the overbearing boss at the office who graces you with his presence more than you see your family. Luckily, putting together a budget is a fairly simple task and only involves elementary-level math, maybe an hour or so of your time, and an honest assessment of where your money goes each month. You can create your own budget by using the pointers in this article or you can download the sample budget HERE and input your own values in their respective fields. You can also print off the Budget Template and follow along using that.

Things You Will Need:

  • Paper/Budget Template
  • Pen
  • Current/Previous bill statements
  • Paystubs
  • A simple calculator

Step One- Determine Monthly Income:

So the first thing to do will be to determine how much income you bring in each month. Include everything, from your salary to bonuses to monetary gifts and interest and dividend payments. For the purposes of this budget, only include income that you receive on a monthly basis and that you can reliably count on. List the sources any way you want, but write them down on your budget template under the heading of INCOME. Now add all of those sources of income together and see what you come up with. Put that number in the box to the right of the TOTAL INCOME category.     

Step Two- Determine Monthly Expenses:

Now it’s time for the expenses. First start with all of your non-discretionary monthly bills (amounts that are not up for discussion, such as a mortgage), like car payments, rent, mortgage payments, cable bill, phone bill, etc. Once all of those are compiled, we need to start with the discretionary bills (amounts that are up for discussion, such as groceries for the month or amount spent on eating out). List as many things that you can think of that you spend money on each month, and honestly assess how much you spend in those categories. Include items such as groceries, clothing, entertainment, fast food restaurants, books, movies, CDs,  toiletries, laundry detergent, household supplies,  rover’s dog food, and little Suzy’s barbie fund. List these expenses like you did your sources of income under the EXPENSES heading on your budget template. The point is to create a category for every dime you spend, so that nothing is left out. If you run out of spaces just move to the right two columns and keep listing, still staying under the EXPENSES heading. Add up all of your expenses and place that number in the box to the right of the TOTAL EXPENSES category.

Step Three-Do The Math:

Now, take the total amount of income you receive every month and subtract the total amount of expenses you incur every month. Place that number in the box to the right of the UNALLOCATED MONEY category (because this is money that you have not allocated to any budget category). Did you have any money left over?  If so, then great! Give yourself a pat on the back (as long as you’ve assessed your discretionary bills accurately)! If you ended up in the hole, don’t have an aneurism, it can be fixed. Just simply identify where you can cut back your spending. The easiest way (or the hardest, depending on how you look at it), to trim your expenses would be to reduce your amount of your discretionary bills. Cut back on how many movies you go see, how much clothing you purchase, or how many times you eat out. Believe it or not that’s really all there is to it, you’ve just created a basic budget.