Creating a budget is the key to gaining control over your financial life. Your budget is the map that will guide you to financial success. Living life without a budget is like trying to make a movie without a script, or hiring Bobby Valentine to manage your baseball team. It’s just not going to work. Most people don’t have a budget, so it’s no wonder they feel lost when it comes to their finances. It’s easy to do and it should take about 30 minutes. If you want to build your wealth, creating a budget could be the single most important action to take. If you know how to use Microsoft Excel, there are some great templates available that can help you get started quickly. You can find some here: http://office.microsoft.com/en-us/templates/results.aspx?qu=budget&ex=1&origin=TC006206279 If you’re not an Excel user, you can just use a pencil and paper. Here is how to create a budget for 2013 and use it effectively:
- Write down your monthly income. Don’t forget to include sources other than your paycheck, such as investment income.
- Now write down all of your monthly expenses. Here are some categories that I have on my budget: rent/mortgage, utilities, insurance (home, auto, health), charitable donations, gas, groceries, loan payments, utilities, other expenses.
- Subtract your total monthly expenses from your monthly income. That is your monthly surplus (or deficit) amount.
- Multiply your monthly surplus or deficit by 12 to get an annualized amount.
- Finally, subtract any one-time expenses or anything else that’s not already on your monthly budget. How much will you spend on Christmas gifts? Vacations? Home improvements?
