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How to Create a Budget In 6 Steps

Think about a time when you found yourself short on cash. It was probably embarrassing, and most likely caused a lot of unnecessary stress in your life. Maybe it was an emergency, or maybe it was just that some of your typical monthly expenses got away from you. Whatever caused it, the worry and panic when you realize you won’t have enough to get through until payday can be avoided through a well-planned budget. How to create a budget might cause panic, but it's not as difficult as it might seem.

Step 1. Note Your Income

We need to know what we’re working with. For most, this should be simple, how much do you make for a month? If you’re a freelance worker, though, or your income fluctuates, then it gets a little more difficult. Just figure out an average, and come up with a figure that you can roughly predict so that you’ll have something to work with. 

Step 2. Calculate Your Recurring Expenses

This is possibly the most important step when you think about how to create a budget. Think about your regular bills. Your phone bill, cable, rent or mortgage, any subscriptions or regular donations you make, these will all be more or less consistent each month. Start by totaling them up. Next take a look at those expenses that aren’t consistent, your water bill, electricity, etc. You can usually see what those typically are from month to month, or you could average them to find something close to a standard. It pays to round up when you’re figuring out how much you spend each month, just in case.

Step 3. Calculate Your Day To Day Expenses

After you have a total for your monthly expenses, make some categories for your day-to-day expenses. Groceries will be a big one, maybe entertainment, travel, or fuel. Just break it down into everything you spend money on. This part can be kind of tricky. It helps to keep track of expenses for a few months to see where your money is going and where you can think about spending a little less.

Step 4. Set Some Goals

Everyone has an idea in the back of their mind about what they’d do with a little extra money. Put those ideas on paper. Maybe you want to put $2,000 aside for a vacation at the end of the year, or a few hundred bucks for some new appliances. Don’t forget your credit cards. How much will you need to pay each month to get them paid off? Figure out everything for savings and debt and decide how much you’ll need to set aside every month. This is the whole reason you're looking into how to create a budget. 

Step 5. Budget Assemble!

Now put everything together. Start with your expenses to make sure you can save enough to meet your goals. If you can’t, you’ll need to adjust something. Start by looking at your day-to-day expenses and see what you can cut. Do you need that cup of coffee every morning, or could you get up a little earlier and make your own? Do you need to drive to work, or could you save some money on fuel by walking or biking? Put everything together on paper, or find an app to help out. There are plenty of great, free apps to help with budgeting. 

Step 6. Don’t Look Back… Until You Do

Now that you have your budget in place follow it. You’ll need to pay close attention to your spending and use some willpower to make sure you don’t go over your limits. If you spend too much on groceries in week one, you’ll need to figure out how to adjust, don’t let yourself slip! After a couple of months, it’s time to reassess. How’s it going? Have you been able to stick to your budget, or have you consistently gone over in a particular category? It’s important to have a realistic budget, so make adjustments as necessary. 


In the end, no one can force you to stick to your budget. How to create a budget is different for everyone, and it's specific to your life. It’s up to you to ensure responsible spending. On the plus side, the rewards will add up pretty quickly. In just one month of sticking to your budget, you’ll not only feel less stressed, but the rewards will show themselves in your savings and will add up pretty quickly. Stick with it, reassess every couple of months, and most importantly, be realistic. It won’t take long for it to become a good habit and start to improve your life. 



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