How to Make a Budget - Steps to Success

Budgeting money is considered a financially responsible move for married couples who want to not only save money, but have some left over to spend. Unfortunately many people tend to live paycheck-to-paycheck and have little or nothing left over at the end of the month after expenses. These people are often left wondering where all the money has gone. Making a budget not only allows you to see where the money is going, but what is really left over. A budget will also serve as a guideline for prioritizing expenditures. It is a good idea for married couples to make a budget together and continually have open communication about finances and how the budget is working. Here are 5 steps to making a budget that you can go through together.

Step 1: The Set Up

When creating a budget, it's a good idea to start by writing down your overall target goal for creating a budget. What is the purpose? Certainly you want to live within your means and avoid unneccesary debt. Do you want to save for emergencies and your future retirement? Do you also want to save extra money in addition to these purposes? Is there something specific the extra money is ultimately going towards? Often times, people will create a budget to assist in saving for large purchases such as a vacation, a new home or a car. 

Step 2: Make a List

When making a budget, be sure to be specific. Daily expenses can add up, as can smaller bills such as dry cleaning and pet food. Using old bills or receipts, make an exhaustive list of regular expenses and another list for incidentals. Once it is down on paper, add up the cost, per month, of the expenses.

The first thing to ask about the itemized list is, what expenses can be cut down? Perhaps there is a better cell phone plan or a less expensive dry cleaner. Look for ways to cut back on expenditures by finding ways to combine. Consider switching to generic brands for certain household items or packing a lunch for work rather than buying lunch out.

Step 3: Account for Savings

Take into account the target goal and determine to set aside a sum of money each month that will not be touched. Create a separate account for the money that is going towards the target goal. Even if the amount seems small, it will add up over time and it is better to save a little rather than having nothing at all to put towards the target goal.

Step 4: Monthly Statement

A budget should be maintained monthly and adjusted accordingly by receipts and bills. This way, it is easier to see what monies are being saved or if the budget is working and if any adjustments need to be made. This is also a good way to be accountable to each other for sticking to your budget plans. Be patient as you figure out the necessary amounts for each item, and work together in cooperation and love towards your goals.

Step 5: Expect the Unexpected

If at all possible, you should create an emergency backup fund to cover incidental purchases and unexpected expenses such as car or house repairs, school clothes or veterinary bills.

When living on a budget, a good rule to remember is budget is a form of restraint, not constraint. While it isn’t wise to break a budget on a whim, it may be justifiable to put money into a sound investment or a purchase that is expensive, but worth the extra cost. Couples should make these types of decisions together and both feel good about what you decide. Just be sure that you compensate for the loss by adjusting the next month and starting the savings process again.