Creating a personal budget

Creating a monthly budget takes a little effort, but the payoff is big. Here are a few tips to begin developing a careful, realistic plan toward financial management.

1. Make a full-accounting. Pull out all records and write a list of where and how much money was spent last month. (Usually, it's a lot more than one might think.) This is the most important step in developing a budget because if you don't know where it is going it is pretty hard to know where you can save.
2. Determine the necessities. After you've determined where your money is being spent, which items are necessities? Separate groceries, utilities, rent or mortgage, insurance, and whatever else is absolutely needed from month to month.
3. Look at the extras Now look at "the extras." This is all the "fun" stuff left on the list like meals out, weekend activities and travel. Don't forget all of the little things; those are the expenses that really add up.
4. Learn to cut back. Now is the time to begin developing the new budget. Go through every item and determine where cutting back is possible. It may even mean living beneath one's means, but it gets easier when it becomes a habit.
5. Pay yourself first Pay yourself 10% of your monthly income before you do anything else. Put this in a bank account and don't touch it. Just forget about it and let it grow. It's amazing how quickly this will add up.

Managing money and bills can often be a difficult task. But it doesn't have to be. Here are some tried and true tips that will help you get a grip on your finances.

Staying on Budget

A budget only works if you stick to it. But, if you accidentally go over budget in one area, don't panic. Instead, try to cut back in other areas so you can still come out on target.

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Review your budget at least yearly to see if anything has changed. Has your income increased? Or, have your debts increased? Have your goals changed? If so, make sure to adapt your budget accordingly.

How to Begin Saving

You don't need to make a lot of money to save it. Many people living on less than $25,000 a year manage to set aside $50 or $100 every month. On the other hand, some people earning more than $50,000 a year are actually spending themselves deeper and deeper into debt.

But here are easy ways to save:

Spend less. A budget will help you determine where all your money is going and where you can save.

Pay yourself first. Transfer a fixed amount from each paycheck to your savings account. Then cut back on spending until you can live on the remainder. Even a small amount of regular savings is a good start.

Arrange for automatic savings deposits. Ask your bank, savings and loan, or credit union to automatically transfer a fixed amount each month from your checking account to your savings account. It's easiest to save money when it never passes through your hands.