How to Budget

I am going to assume you are starting from ground zero and have not experience with budgeting. The first thing you want to do is figure out where your money is going. A budget is simply telling your money where to go, rather than wondering where it went. So let’s stop wondering and try to figure it out.

This will be a fun exercise. Get out a piece of paper and a pen or pencil. Start writing down the expenses you know you have off the top of your head in a given month. Start with the necessities: food, shelter, utilities (we will assume you have clothes and buying more at this point is not a necessity). Then move on to other regular expense you know about, and then down to other items. Again, this is all straight from your head. Don’t worry about getting out the last bank statement or check stubs… yet.

You may have a list that looks something like this:

• Rent/Mortgage = $700
• Natural Gas Bill = $35
• Electrical Bill = $40
• Food/Groceries = $300
• Car payment = $250
• Gas = $200
• Cable TV = $55
• etc.

Just keep going until you think you have it all down. Once you are finished add it all up.

OK, now get out your bank statement and/or check book and find other items you paid for that didn’t comet to mind. Total all the payments again. How far off were you from your first attempt? Hopefully this will emphasize the importance of NOT trying to manage your budget in your head – but you already know that, otherwise why would you be here?