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Create a Better Budget in 10 Simple Steps

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February 07, 2014 · 1.3k Views

If you resolved to get your money matters in order this year, establishing a working budget for your personal finances is the best way to help you meet that goal. Yes, sitting down to do the math and realistically examine your finances isn’t always a picnic, but it is a necessary evil to avoid overspending and serious debt. Create a better budget for your personal finances with these 10 simple steps.




  1. Know what you make: Determine monthly income after taxes so you can know how much money you have available to cover your expenses.  
  2. Know how much you spend: Evaluate your current spending habits by establishing budget categories (for example: Housing, food, auto, debts, entertainment, savings, childcare, clothing, medical, and miscellaneous) and assigning each of last month’s expenses to the appropriate category. This will give you some important insight into how you are spending.
  3. Identify necessary expenses:  Go back through your categories and highlight the expenses that are necessary, such as rent/mortgage, groceries, car insurance and so on. This total amount will help you determine what you can contribute to your savings and use on nonessentials. You should include debts (such as student loans and credit cards) in your necessary expenses so you don’t fall behind on these payments.
  4. Determine how much you can save: Once you’ve determined the amount you must spend each month to survive, budget how much you will contribute to savings accounts. Some experts recommend contributing up to 20 percent of your income to savings and retirement accounts. However, figure out what you are comfortable putting in these accounts and stick to that amount each pay period. If possible, have direct deposit set up so you can have that money go straight to your savings accounts. If you’re saving for something specific (college education, new home, and vacation) establish those long-term goals so the money in your savings accounts has a value to you.
  5. Calculate what is remaining: This is what you can spend on nonessentials such as that pair of Jimmy Choo‘s you’ve been eyeing, a mini-vacation or tickets to a game. It is crucial that you don’t overspend on entertainment and nonessential purchases, as this is how you fall into debt.
  6. Utilize available technology: Take advantage of the apps and software available to help you manage your budget. Using these programs will help you keep track of your spending, monitor your different accounts (checking, savings, IRA, etc.) and pay your bills digitally and on time. Apps like Mint, Manilla and DailyCost are great tools for staying on top of your finances.
  7. Budget for extra income: Make a plan for surpluses, such as bonuses or financial gifts. You can choose to have all extra income go into savings or divide it up to pay off some outstanding debts. If there is an established guideline for money surpluses in your budget, you’ll find that you don’t spend that extra cash on things that you might not need.
  8. Give back: Find room in your earnings to donate, even if it’s only a few dollars, to a charity of your choice each month. You’ll feel better knowing that you’re doing what you can to help a worthy cause, and you can claim these charitable donations on your tax return.
  9. Budget for extra costs: Don’t forget about periods when you spend more than usual, such as the holiday season, and plan for how you will save for those times. It’s also important to have some savings stored up for unexpected events or emergencies like car problems, sudden homeowner costs or medical bills.
  10. Run it by loved ones: Go over your budget with your family. They could offer you some insight or information that can help you more accurately manage your finances.

As American author and publisher William Feather once said, “A budget tells us what we can’t afford, but it doesn’t keep us from buying it.” Creating a budget is one thing, but sticking to it is quite another. Be sure you keep your budget in mind as you make everyday purchases, shop online and visit the mall to make sure you’re staying within the financial guidelines you’ve established. 

alliexaminer profile picture
Alli Sands has been a published writer since the age of 11. Over the course of her career, she has covered topics ranging from local independent music to fashion. She is a currently a freelance writer and a social media professional.

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