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If you asked me what one of my good qualities were, I would tell you that I am able to recognize my weaknesses. Since I acknowledge the many areas I struggle in, I am aware and more likely to work at improving in those areas. With that, I will admit, I struggle when it comes to money. I often think “I work hard, I want to get myself ____ and it’s okay since I work so hard.” My husband likes to remind me that people all over the world work hard but they aren’t always buying what they “want” versus what they “need”. Another reason I love him so much. My husband keeps me in check when it comes to finances.

Today I would like to welcome Katheryn Rivas, who writes for online universities blog as a guest writer. Katheryn is here to talk about setting up a budget and she welcomes your comments at her email. I have followed several of her steps since I took a leave from my teaching job. I have been writing down everything I spend through out the week for a year now in order to track my spending. It helps to see it, just like when you keep a food journal. Anyhow, this weekend I found an app on my Iphone for budgeting (called My Weekly Budget-free)! Very cool!

The Basics of Creating a Simple and Easy-To-Use Budget

Everyone has their tips and tricks when it comes to managing and saving their money. Just one simple search on Google will turn up hundreds of results for budgeting tips and money saving secrets. While many of these money tips and tricks are worthwhile and useful, they cannot be properly put in place until we gain an understanding of our individual financial situation. The first step in money management and financial responsibility is gaining a careful understanding of your financial situation. With the state of the economy today, most of us are thinking about money and coming up with ways to save more money each week. Creating a careful and straightforward budget is a wonderful way to make waves in better savings and more responsible savings. Follow these three easy steps to create your household budget and begin a life of financial responsibility.

Track Your Income

Tracking how much income you have is the first step in creating a budget that works. Typically this is one of the simplest steps in creating your household budget. Take a look at your paystub and see how much money you make and how much is taken out for things like health insurance, life insurance, retirement, and taxes. If you have other avenues outside of your primary job that earn you money (such as blogging on the side, part time work, or some other freelance career), be sure to add in any income you make from these areas. Furthermore, if you are married or in a partnership with someone else and you split expenses evenly, include your partner’s income to your total household income as well. Also, be sure that you include any dividends or interest payments that you receive regularly into your regular income calculation. While your monthly income should stay fairly steady month to month, you should track it over the course of a few months to see if there is any fluctuation. Once you have a complete understanding of your regular income, you can begin to understand your spending habits for your budget.

Track Your Spending

Now that you know exactly how much money you make, it’s time to take a look at how much of that money you spend each month. First take note of your fixed monthly payments, such as rent, mortgage, car payments, insurance, debt, and taxes. When budgeting we look for areas of our spending that we can lessen, but, for the most part, these fixed expenses are ones that we cannot change. Next, take a careful look at your other expenses. These are the areas that we can work to change. Look at your latest bank statement to see where exactly your money is going. Jot down your spending by placing things into categories, including eating out, groceries, entertainment, utilities, subscriptions, and so on. These are the areas of your spending that you can influence and change. Keep a worksheet of each of these categories of expenses so that you can find patterns in your spending habits.

Creating that Budget- Set Achievable Goals

Now that you have a clear picture of the money you earn and the money you spend, you can create a budget and set goals. Total up your entire monthly income and all of your monthly expense (both fixed and otherwise). Subtract the expenses from the total income. The hope is that the number you come up with is positive. If it is positive, you are spending less than you earn (that’s the goal). However, if it is a negative number, that means you are spending more money than you earn. This can certainly worrisome, but it is the entire point of creating a budget. Whether you are in the negative or the positive, there are likely ways in which you can save more money. Take a look at your expenses and see what areas you can work on. Set goals for those “problem areas” that are not so extreme that you won’t be able to reach them. The point behind a budget is to make small changes to your spending habits, so that you can affect your savings habits slowly over time.