How do I Begin Budgeting?

Beginning the budgeting process can be daunting, especially when individuals fear math or basic accounting tools. To start this process, you should list all income and expenses that occur on a monthly basis. A basic budget will have incomes listed in one column, necessity expenses in another, and non-necessary expenses in a third column. Written in each of these columns are the corresponding figures from your check book or bank statement. Using this basic information, the budgeting process can then begin in earnest.

List all personal income earned in the first column on your basic budget worksheet. The most conservative budgeting process is to only list the normal, repetitive income earned at jobs or other regularly paid activities. The income should be net of all taxes or regular deductions withheld from paychecks.

The next column contains necessity expenses. Necessity expenses include all the items that you must pay to maintain your basic cost of living. Housing, utilities, food, clothing, car payments, and similar items are necessities.

When budgeting, listing all regular non-essential cash outflows is a must. This allows you to determine how much income you spend on miscellaneous items, such as dining out, personal items, or vacations and trips. Many of these items are typically one-time expenses. As you start your budgeting process, however, you will see that each little expense can quickly add up and result in higher cash outflows.

Once you have completed your basic budgeting worksheet, begin determining how much should be spent on each item. Many home budget resources provide a basic percentage level for different expenditures in a personal budget. For example, housing should be a maximum of 35 percent of total income, 20 percent for car payments, 15 percent for food, and so on for each necessary expenditure. This provides a baseline for comparing your current budget expenditures to the suggested levels of standard expense levels.

The budgeting can go smoother when you use a computer spreadsheet or specific budget software program. This allows you to simply input information and set up your budget according to your specific lifestyle, income level, and current expenses. The software may also provide the ability to print out the budget. This allows you to maintain paper records for helping prepare taxes or provide information to lenders. Starting out small and working into a more complicated system can also make it easier if you're worried about how to begin the budget process.