How do you create a budget?

Im a single mom and make a middle class amount of $

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  • 1 decade ago
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    See my blog http:/financialiteracyforyou.bogspot.com for three articles on budgeting They are in esscence here. If you find this useful check my blog. I write a weekly column for a local newspaper on financial literacy. Articles are posted weekly.

    Last week week’s topic was getting ready for the 2007 tax year. This week we are going to start talking about the real essence of financial literacy. Recall the AICPA’s definition of financial literacy:

    "the ability to effectively evaluate and manage one’s finances in order to make prudent decisions toward reaching life goals."

    The tools you need are ones that help you plan how you are going to spend your money. First determine your life goals. Be realistic. Write down on paper your short term goals, intermediate term goals, and long term goals. Short term goals are those you can achieve reasonably within a year. Intermediate term goals are those you can reach within five years. Long term goals are those that take longer than five years.

    Remember when making goals they need to be achievable within your actual resources. If you make $25,000 a year and have retirement savings of $25,000 and you are turning sixty-two in five years, it is highly unlikely that you can save enough to have an income of $13,000 a year from your savings until age 80.

    A realistic goal could be purchasing your next car without financing it. Set an amount you are willing to pay for your next car ($20,000) and pay yourself that amount each month ($317.22 @ 2%) from your pay. Placing that at interest in a credit union account provides a safe place to park the car payment until you are ready to replace your current car with a new car.

    Your goals need to be quantified: in five years I will buy a new car for no more than $20,000, in five years I will retire and I wish to have income of $5,000 a year from my retirement savings until age 80, or in 18 years I wish to have $25,000 a year to pay for my child’s college tuition for four years. Another tool you need in goal setting is the ability to calculate the time value of money.

    The next question you need to ask is do I have the resources to achieve my goals. The tool to determine this is budgeting. Budgeting coupled with setting one’s financial life goals puts you in a position to plan your financial journey.

    We are going to continue talking about your basic financial plan. This will be the road map you use to reach your financial goals during your life journey. The first step was to determine realistic, achievable goals. The next question you need to ask is do I have the resources to achieve my goals. The tool to determine this is budgeting. Budgeting coupled with setting one’s financial life goals puts you in a position to plan your financial journey.

    We talked about short, intermediate, and long term goals. Short term goals are those you can achieve reasonably within a year. Intermediate term goals are those you can reach within five years. Long term goals are those that take longer than five years. Write these goals down. Make sure they are quantifiable: in five years I will buy a new car for no more than $20,000, in five years I will retire and I wish to have income of $5,000 a year from my retirement savings until age 80, or in 18 years I wish to have $25,000 a year to pay for my child’s college tuition for four years.

    The next question you need to ask is do I have the resources to achieve my goals. The tool to determine this is budgeting. Budgeting coupled with setting one’s financial life goals puts you in a position to plan your financial journey.

    The first step in preparing a budget is to determine how much money you have coming in. Write down one column listing the source of your monthly income (e.g. job) and a second for the amount. Total it for the month. A good idea would be to do this for all twelve months; so, you get a complete picture of your income, including any bonuses or special payments you receive.

    After determining your monthly income, list the expenses you have to pay every month using two columns, one column identifying who you pay and one to show the amount. These are expenses like mortgage payments, rent, utilities, phone and other items you have to pay others. If you have other special required payments through the year (e.g. annual insurance payment) doing expenses for the whole year would help you plan to manage your cash to meet all your expenses through the year without borrowing. What is left is money you can choose how you spend. I would include food, clothes, and other items that you determine how much you spend. What is left after you have determined your spending requirements and subtracted your spending from your income is what you can save. That may not be very much.

    We are going to continue talking about your basic financial plan. Last time, we discussed how to create a budget. After having created the budget and determined your income and spending, we used the budget as a gauge to see the amount of money you have available to meet your financial life goals. Many do not have enough money to meet their desired goals even after having planned their spending.

    At this point, you have determined that you do not have sufficient resources to meet you financial life goals. What can you do?

    1. Revise your financial life goals to meet your resources. Look at what the money you save can do and change your goals to meet your available cash. If I had planned on $5,000 of retirement income each year from my savings and the amount money available for me to put aside would only allow $1,500, then my revised goal would be saving to achieve the $1,500 level of income.

    2. Cut spending. Look at what you do spend money on and decide if there is any way you can reduce your spending. If you can do this then you increase the money you have to meet your financial life goals.

    3. Pay down debt. This course action is one many Americans need to take to achieve their financial goals. If you pay down debt you are no longer paying interest. This frees up the total mount you were using to pay debt once it is paid off. You could combine paying down debt with cutting spending to more rapidly free your money to achieve your goals.

    4. Get a second job or other second source of income. If you cannot find enough money through cutting spending or paying down debt, then this is a solution. It is a very hard solution because it takes time and energy. Obviously, increasing you money resources makes it more likely that you will achieve your goals.

  • 1 decade ago

    Check out http://www.expenseregister.com . This is free tool to create a budget and track expenses. You can upload your bank and credit card statements. They also have nice reports and charts. You can create a budget and they have a nice tool for that, it suggests all the categories, then you enter your expenses and you can check your budgeted and actual expenses... so you know how much you have left in each budgeted category.

    They also have a category in the budget called 'Savings'... it is elementary that you should save, but when there is someone to guide you through this budgeting process, it makes it a whole lot easier.

    I have been using it for some time now and I am very pleased with it. And it is totally free!

  • Anonymous
    1 decade ago

    It's a simple process, really.

    1) Take a sheet of typing paper, and draw two lines horizontally through the middle, dividing it into thirds.

    2) Above the top line, write down all the money you make in a month.

    3) In the middle section, write down everything you spend on stuff you NEED (rent, mortgage, insurance, food, etc.).

    4) In the bottom section, write down stuff you WANT to spend money on (vacations, restaurant meals, money for savings accounts, etc.

    5) Add up what you're making and what you're spending.

    Example:

    Income: $3000

    -----------------------

    Rent $800

    Cable $125

    Car Insurance $60

    Electric $100

    Phone $30

    Cell Phone $40

    Water $15

    Food $300

    Gasoline $120

    ------------------------

    Savings $400

    IRA contribution $400

    Cash from the ATM $400

    Entertainment $230

    Total income: $3000

    Total Spent: $3000

    Because the total income and the total spent match, this is a "balanced budget"

    If you have more spending than income, you must do one of three things:

    1) Earn more money (a second job...)

    2) Spend less

    3) Take out a loan (the government loves to do this for their budget)

  • 1 decade ago

    I keep mine on an Excel spreadsheet. Rows, going down, are Date, Balance Forward, Paycheck, Child Support, Cash, etc. Subtotal on the next line (Bal Fwd + Income). Then start listing expenses; don't forget gas, groceries, prescriptions, allowance, with your regular bills. The bottom of each column is the total of your Subtotal (income) less all the expense lines. The next column's Balance Forward is a copy of the previous column's total. Your first three columns are for descriptions: name, due date and amount; then sequentially across the page top each column with the date of each payday. Format it correctly and the spreadsheet will do all the math for you. You can plan out your expenses, easily seeing what dates have extra money or where you'll be short in three weeks if you splurge today.

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  • 1 decade ago

    My husband and I have been married for 15 years and we have always lived on a budget.

    I make a spreadsheet (mine is on Excel) but you can also do it longhand on paper.

    I list:

    Income: Wages, Money from Family, Etc.

    Then I list all the outgo:

    Rent/Mortgage

    Gas

    Electric

    Phone

    Cable

    Water/Sewer

    Cell Phone

    Credit Card

    Savings Account

    and keep a total

    I also then list categories for:

    Miscellaneous: doctors, post office, clothing, etc.

    Charitable Organizations: Church offerings, charities, etc.

    Groceries: anytime you buy groceries

    Auto: gas, insurance, maintenance, etc.

    Cash: anytime you go to the ATM or withdraw cash

    Entertainment: movies, eating out, museums, etc.

    I then create 2 columns for each category. The first column is what I estimate it will be (this estimation is based on what past month's bills have been). The second column records what the actual cost is when the bill comes in.

    At the bottom (on the computer) it will calculate for you the difference between your Income and your Output. Over a few months you will learn how to calculate what your estimates should be.

    This usually keeps any surprises from cropping up.

    Good Luck!

  • 1 decade ago

    I am not a single mother, but what I do is take a spiral notebook and write a budget out for the entire year. I only get paid twice a month, so anything outside of that is extra money to go in my savings. As, it approaches payday, I doctor or add in when bills come up. This helps me to keep a running accurate total. I write down my bills and the exact amount I get paid. I put my biggest bills first and try not to go to wal-mart or anywhere until after my bills are paid. If I have any money left over after payday before the next, I either save it or I roll it over with the next check. There are some good websites you can go too as well. You can type in free budgets online and can download samples that you can follow. It is hard work budgeting, but in the end.. It is so worth it. An don't forget about yourself either. I have one luxury item a month. I may go buy a household item or get my nails done. Keeps me from feeling like all my money belongs to someone else.

  • Anonymous
    6 years ago

    by putting the money aside and paying in full when it is due. By tracking all of your expenses for several months, you can determine where you are spending your money and where you can cut expenses to save.

    Next, calculate what you will need for clothing, makeup and other incidentals and budget a monthly amount for these. If you don’t spend it in that month, put it in your reserve account to carry over for future months. Using some sort of spreadsheet may help you to track your reserve account. Be sure and budget for school supply expenses, if they apply.

    You also need to budget for a “rainy day” fund, with a goal to have six month’s worth of income set aside. This will take time to accomplish, but you hav

  • 1 decade ago

    I've created a spreadsheet where I list all of my expenses & when they're due on the left and my pay periods across the top. Then I start with entering my minimum payment amounts under the corresponding pay date for each month. I then total the payments for each pay date, enter my estimated paycheck amount, then subtract the bills from my paycheck. That way I can see how much I'll have leftover & make sure I have enough for gas, groceries, etc., and I can plan for periodic expenses like car registration, insurance renewals, etc. I can also plan for extra spending on birthdays, holidays and vacations. I've tried other methods before, but this is the only one that's worked for me, especially since it's so easy to update any time I need to shuffle my bills around a bit!

    I'd be happy to email it to you - you can send me an email from my profile page and I'll send you a blank version (if you let me know your pay schedule - bi-weekly, 15th & 30th, every Friday, etc. - I'll set it up for you).

  • 1 decade ago

    Creating a budget is a simple but time consuming task. (I am also a single Mom on a tight budget)

    You need to sit down and make a list of the things that you spend your money on starting with the necessities, make sure you leave room for clothing and entertainment, as well as transportation (gas for the car or bus fair), and savings (I like to call it the OH **** fund, LOL)

    Once you have a list done you can use a simple Excel spreed-sheet to perform weekly yearly and monthly calculations.

    The most important things about budgeting it that you have some room for flexibility just in-case that water bill is a few dollars higher next month (if its less GREAT put the extra in the OH **** fund), and the other important thing is that you stick to your budget.. if you budget 50 dollars for gas a week and a friend needs a ride and you've spent your 50.. you cant help unless they can give you some gas money....

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    1 decade ago

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  • 1 decade ago

    First you have to figure your monthly income

    next write down your monthly bills and amount due

    write what you spend on food and gas

    add up the amount and deduct it from your monthly total income the remainder would be what you have as extra for spending or savings. If you are paid weekly you now need to divide the montly expenses by 4 to see what needs to be put away for payments. you could also set up envelopes with the amount due for the end of the month for each individual expense and weekly place the money in the envelope hope this helps you out.

    Source(s): experience..been there
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