How to Make A Realistic Budget

There are numerous theories out there on the best way to make your own budget but the clearest, most logical we’ve found in a long while comes from the Financial Planning site at About.com. It involves gathering a fair bit of information and spending an hour or so collating it, but it sounds like it will make a realistic budget that you can actually use to help you save money or get out of debt. The main steps are:

1. Gather together every relevant bit of paper - bank statements, household bills, income information and so on. You aim to create a monthly average which means that the more you can gather the better, to average in payments that you may only make once or twice a year.
2. Calculate your total income from all sources, including your job, investment income or anything else, and make a monthly average.
3. Calculate your total expenses over the period of the paperwork you’ve gathered (or longer if you know of other important payments) and figure out the monthly average.
4. List all your expenses, dividing them up into fixed and variable expenses.
5. Total up your monthly “profit or loss”, and hope that it’s a profit. If not, you’ll need to figure out some changes to your budget immediately. If you do have money left over, you must decide where to allocate it - for example to an emergency fund, or to a retirement savings plan.
6. Adjust expenses where you can to save more money.
7. Every month, sit down and review your budget. It only takes a few minutes but can save you a lot of money.