Now that you know what information you need to make up your budget, let’s get started. Make sure you have all your information handy such as your pay check, bills, bank and credit card statements. What will you use to draft your budget? Paper or Excel – whatever is easiest for you. You will likely make some changes as you go. There are lots of templates on the Internet or you can make your own.

Start with your expenses. List your ‘needs’ (versus ‘wants’) first. Typically these are higher amounts and are predictable in terms of the monthly cost. Expenses such as rent, food and utilities are examples of ‘needs’. Debt repayment, transportation, clothing and grooming (toiletries and hair cuts) are next, followed by discretionary spending categories such as savings, entertainment and vacations. Use monthly amounts for your budget and if you don’t have a good idea of what you spend, then estimate. Review your bank and credit card statements – have you included everything? Total your expenses.

Compare the total monthly expenses to your net monthly income. Are you spending more than you make or less?

We’ll pause here for now. It’s a good idea to look back on your work in a day or two to see if you’re budget includes all your expenses. Next post will include an example.