Developing a Budget

Creating a budget should be a simple task but many people just cannot seem to do it; either they are not inclined to use spreadsheets and ledgers or they are just not number people.

Even if it requires you to get help from someone else you will find it in your best interest to analyze your finances by graphing your expenses versus your income. Your budget should account for every penny spent or earned no matter what it is for. It should also include projected expense amounts for the month and a buffer for emergencies.

If you are not the computer type and would rather you can use a notepad to write down these figures. If you are comfortable with computers you can use free software such as OpenOffice (openoffice.org), Google Spreadsheets (docs.google.com), or GNUCash (gnucash.sf.net).

Divide the spreadsheet/page into two columns; one to list your income and one to list your expenses. Include in your expenses column all major recurring bills such as food, utilities, car insurance, etc. Then if you can afford to add a 10% buffer for unexpected expenses and emergencies.

Once you have your baseline budget analyze your spending habits and create a few hypothetical projections to see if there are any places where you can potentially trim down on your spending.

It's up to you whether or not to spend the time and effort to create a budget. It's also up to you to stick to it which is necessary to make it effective; however, if you use a budget properly it will help you to make more rational decisions about your finances.

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