How To Budget Money - Accurately And Honestly

If you want to know how to get your finances in order and how to budget money, this article is for you. In order for you to figure out a budget you have to know exactly what you have to work with. For that reason you need to follow these steps to make a budget that is realistic and that you can stick with.

While it will be important for you to be committed to making your budget work, and that will probably mean making some simple sacrifices and lifestyle changes, it's unrealistic to assume that you will suddenly become this ultra frugal person. Don't set yourself up for failure by making your budget too tight. It's just like a diet, no one will stick to a really strict diet and they will eventually fail, a budget is the same way; if you make it too restrictive you won't stick with it and you will fail.

The first thing you need to do is grab a piece of paper, a pencil, and a calculator. Next you will make two columns on the paper. At the top of the first column you will write "Expenses". At the top of the second column you will write "Income".

Gather up all of your bills and any expenses that you pay on a monthly basis. Make sure to include everything including spending money and a clothes allowance. To make sure you've included everything take a look at the last several months of credit card bills and bank statements.

If you have bills that you pay quarterly or yearly just average them out to figure out how much you need to save each month in order to have enough money to pay them when they come due.

Now that you've got a complete listing of all your ongoing monthly bills, total them up. This number will be how much you spend every month (of course for most people the amount of money you spend from one month to the next will vary depending on the time of year and other factors, but if you've gathered all your statements this should be a fairly accurate listing of your monthly expenses.)

Next, take all forms of income, this includes your pay from work but also include any form of interest payment you may receive, income from a roommate, etc. Just like with the expense column, you want your income column to be as accurate and complete as possible. Make sure to include your after tax pay. Total this column.

Now that you've got your Expense and Income columns totaled all you need to do is subtract the expense column from the income column. If the number you are left with is a positive number than you are doing ok. That is the amount of money you have left over every month and you can use that money to pay down debt, open a savings account or start investing.

If, on the other hand, you are left with a negative number after you've subtracted your expense column from your income column, you need to make some serious changes to your spending habits. It's simple math, you are spending more than you are making and unless you can increase your income you will have to decrease your spending.

There you go, three simple steps on how to budget money. No matter where you are financially right now, you can be in a much better position in a few months if you follow these steps and take control of your money starting today. Good luck.