BUDGETING

5 Steps to Developing a Budget

Step 1: Identify Income and Expenditures

Gather all information that shows the inflows and outflows of your income. The easiest way to obtain this information is from bank statements. It would be helpful to have at least two to three months of bank statements to gauge an average amount of your expenditures.

Step 2: Plan

Create anticipated spending amounts for each area of expenditure by reviewing past expenditures on your banking statement. Take note of areas where you are spending more than needed and decide how to eliminate the unnecessary spending. The following are examples of common areas of expenditures:

Rent
Utilities
Car Insurance
Food
Cas
Credit Card Bills
Cell Phone
Clothing
Personal Care Items
School Related Expenses

Step 3: Monitor Your Spending

Keep written records of all your purchases and payments. Save all receipts and track all transactions in a notebook or computerized budget using Excel, Quicken, or Microsoft Money. There are a variety of downloadable budgets on the web.

Step 4: Review Your Progress

Compare your actual spending to your spending plan. Note any discrepancies between the two amounts to find areas that need special attention. Examine your spending to reduce or eliminate some expenses. Look for alternative ways to decrease or increase savings, income, and expenditures. Your life is constantly changing and that includes your financial situation. Review your spending plan at least once a month.

Step 5: Make Changes

As you review your spending plan monthly, assess whether it meets your changing needs and adjust expenses and/or income to reach your long-range financial goals

Downloadable Budgets:
http://www.pearbudget.com/