- 1). Choose a budgeting medium. You can use a simple word processing document, a spreadsheet document or a home accounting budgeting software. It doesn’t matter what type you use – choose one that you feel comfortable with so that you actually will update it and check it on a regular basis.
- 2). Assess your current financial situation. Start by listing all your income items, such as salary and alimony or child support payments. Don’t forget to include any miscellaneous items, including stock dividends or accrued interest from savings accounts.
- 3). Write down all your expenses, including your housing payment, utilities bills, credit card payments, car payments, insurance costs and living expenses. Divide your expenses into groups, such as living costs, debt payments and luxuries. Luxuries should include entertainment expenses, clothing allowances and other things that you spend money on that you don’t necessarily need, such as manicures or coffee shop lattes.
- 4). Add up all your income and expense items separately. Compare the two lists to see whether you can actually afford all your regular expenses. If you are spending more than you are making, make a list of expenses that can be cut out.
- 5). Set short-term and long-term financial goals, such as paying off a school loan or saving for a house down payment. Place end-goal dates on these items so that you can determine how much you need to save each month to reach the goals. For example, if you want to save $10,000 in a year, you’ll need to have a minimum of $834 in savings per month.
- 6). Input your income and expenses into your chosen budgeting medium with dates. For example, if you get paid every two weeks, write down your paycheck amounts on their respective payment dates. If your mortgage or rent is due on the first of every month, write that down.
- 7). Make a goal of saving money, even a little, each paycheck. Cut out any unnecessary expenses that you don’t really need, but allow yourself some flexibility for unforeseen expenses, such as oil changes or a doctor’s visit.
- 8). Check your budget and saving goals at least once a week to see how you are making progress. You may need to edit it to accommodate for new expenses or savings goals. If you receive a raise, make changes to save more each month rather than simply spending more.
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