How to create your successful budget

Think of your budget as a tool to help you get out of debt and save money, not as a financial diet.

Step 1: Download a budget worksheet

Go through your check book or bills for the last couple months and look at your expenses. You can add or remove categories from the worksheet to meet your needs. Think about your hobbies and your habits and include these in your budget.

Step 2: Calculate your income

Look at your pay stubs and calculate your average monthly pay after taxes, insurance and other deductions your employer makes. Do the same for any interest income, dividends, bonuses, or other miscellaneous income.

Step 3: Calculate your expenses

For each expense category, try to come up with a budget amount that is realistic and reflects your actual expenses. You should also set spending limits so that you can begin to save money as well. If you need help setting spending limits, check out our budget guidelines.

Step 4: Record your budget information

Once you're comfortable with your expense categories and budgeted amounts, start entering information into your budget from the last month.

Step 5: Compare your income and expenses

Subtotal the income and expense categories. Subtract your total expenses from your total income to get your net income.  

• If the number is negative, your expenses are more than your income. Changing your spending habits by cutting out any unnecessary purchases could probably solve this problem.
• If you have a positive net income, consider putting that amount into a savings or money market account at the end of each month.  Extra cash left in your checking account tends to get spent.

After you've tracked your actual spending for a month or two, look at your expenses and try to identify where you can comfortably make some spending cuts. Also, update your budget and expenses monthly so that everything stays current.

Budget ingredients for success

• Tailor categories to your spending habits, not somebody else's
• Create enough categories to give a good idea of where your money goes and where you might be able to cut costs
• Add irregular expenses, such as taxes, insurance, etc.
• Include cash expenses tracking and recording
• Make a category for savings so you treat a contribution to your savings as you would a bill or expense
• Write realistic goals so you know where you want to go

Tiny tips for balancing your budget (and your checkbook)
Balancing your budget and checkbook can be time consuming, but here are a few seemingly small things can help save time. When writing checks or recording entries in your check register, print or write neatly and use dark blue or black ball point pen. (Avoid gel pens, light colored inks or pencil which are hard to read or fade.) You may also want to get duplicate (carbon-copy) checks so you will immediately have a record of each check you write as soon as you write it. If you are writing a check to pay on an account that has a number, include the account number to be paid in the “Memo” area of your check.