Determine your monthly income.
The first step is to see how much money is actually coming in every month. So add up the combined take-home pay within the household to see what you’re working with. Be sure to include any side jobs or investment income that may add to your total.
List your monthly expenses.
Now for the reality check. Add up your average monthly bills like mortgage or rent, car payments, insurance, credit card debt, loans, utility bills, groceries, dry-cleaning, transportation, childcare and entertainment costs. Hint: it’s probably higher than you think.
Do the math.
Subtract the total monthly expenses from the household take-home pay and see what you have left. Even if you’re making enough to easily cover your bills and more, you can always benefit by making a budget. Once you know your full financial picture, you can make plans to create and meet other financial goals.
Software that saves time and money.
Personal Finance Programs like Quicken or Microsoft Money are great for helping you create a workable budget based on your spending history. They can help you organize all of your financial information in one place so you can track your spending and make adjustments accordingly.
See what you can cut.
Are you paying for cable channels you don’t watch, more data than you use, lunch at work and gourmet coffee every morning? Call your cable and cell phone companies and see how you can lower your bill. Brown‑bag your lunch a few days a week and take a thermos of coffee to work. If you eat out a lot, try preparing more meals at home and avoid impulse purchases with your credit card.
You’d be surprised at how much you can save if you really look at where you’re spending. The key is to cut out the things you can do without and lower your other expenses without going overboard. You’ll find a manageable budget is easier to stick to while letting you still live comfortably.