Create a list of your monthly income. Sit down and make a list of all of the different ways in which
money is coming in. This could take the form of your bi-weekly paycheck, side jobs, alimony, child
support, etc. If there is money you receive on an annual basis, just take the total amount and divide by
12. Be sure to include all sources of income.
Track all of your expenses. The best way to do this is to keep a list of everything you spend money on
for a full month. Save all of your receipts and each evening write down your expenses for the day.
Compare your income and expenses. In the simplest terms:
Income < Expenses = Bad
Income > Expenses = Good
Adjust your expenses, if needed. If you need to reduce your expenses, go back to the list you kept of all
of your expenses and look for places where you can trim. (For example, think about how a daily trip to
Starbucks or other trips to eat out can add up. A $6 coffee and muffin at Starbucks adds up to $1,440 a
Pay yourself first. The most important part of any budget is putting a little bit away into savings. Any
budget that does not factor this in is not a sound financial plan and will not help you achieve your
Plan for the inevitable emergency. A good rule of thumb is to have 6-9 months of living expenses in
savings to be prepared for that inevitable medical emergency, auto repair, or other unforeseen event.
Additionally, this will help you avoid paying for that emergency with your credit card, which can easily
bust your budget.
Create new categories and plan for the future. Once you’ve examined your expenses, a trimmed
some of the fat, you can start planning for the future. Often overlooked are debt reduction, retirement
savings, and emergency savings.