Starting with your budget is a very good place to start. You need to know how much money you NEED, how much money you HAVE and how much money you WANT (remember needs are different than wants).

How fancy you get is up to you (computer or paper and pen), make a list of EVERYTHING you pay out: electric, phone, water, cable, internet, cell phones, mortgage or rent, car payment(s), donations, credit card and loan payments, car insurance, homeowner's insurance, life insurance, health insurance & retirement savings (unless it is taken from your paycheck before net ie gross), college savings (check out your state pre-paid college plans that have low monthly payments you make on locked in college costs), membership fees, estimated monthly on groceries, monthly estimated on gas, monthly estimated on eating out, monthly estimated on movies, estimated monthly on those cups of coffee (you know the ones that cost $3-$5 each!), EVERYTHING!

Total your list of what you pay out monthly...then get up off the floor and start the next task...

Now make a column of what you earn each month from all sources (yes I realize this will be a shorter list!).

Moving on...you need to consider saving for those larger occasions we usually wait to arrive and then panic or worse resort to credit cards to pay for! Make a list of the occasions you know are big expenses like vacations, annual parties you host, Christmas, a home purchase (plan on saving 20% of the purchase price down plus closing costs to avoid paying Private Mortgage Insurance aka PMI), car purchase...you get the idea. Then assign an amount to each event that you can estimate from previous trips, parties and such. A tip for Christmas or any other event where you are giving out presents to multiple people...assign a dollar amount per person before you even start any shopping. I make a simple Word chart each year with each person's name, dollar amount budgeted, item ideas, stores / sites I can find items, dollar amount actually spent and completed. DIVIDE THE AMOUNT FOR EACH EVENT/PURCHASE BY 12 AND ADD THAT AMOUNT TO YOUR MONTHLY BUDGET LIST (you know the REALLY long list of what you pay out each month).

Adjust your total on the EVERYTHING you pay out monthly list to now include how much you need to save monthly for the large yearly occassions like parties, Christmas and vacations too.

The goal now is take the amount of income you make and subtract the total of EVERYTHING you pay out monthly (that smartly includes planning for large occasions) and see what is left over...or how much you are short. You want to increase the amount left over to direct to savings.

If you will be purchasing a home use a mortgage calculator to estimate monthly payments to make sure your new housing payment fits in your budget. If you are like me you also want to see what expenses you can reduce or eliminate to allow you to survive comfortably on one income if that is your goal. This list will help you now plan to reduce unnecessary expenses (too may trips to get $5 coffees, reduce eating out), realize it is time to tackle paying off credit cards (see my credit page for tips), re-plan your vacation destinations or spending, you get the idea!

Reducing or eliminating expenses may involve changing your habits and how you manage your money. Besides reducing the daily amount my husband was spending on coffee, we also opened a checking account for his spending money. He has a budget every two weeks (matches his paydays) that is deposited to his spending account. This makes it easier for him to manage his spending and helps us avoid bank overdraft fees in our main checking account that I use to pay for bills and our groceries. On my Credit page I talk about an initial emergency fund, check at your bank to see if they offer overdraft protection linked to your savings account...this is a better option than paying a huge overdraft fee.

Now that you have done the hard work of listing all of your expenses, planning for savings and big occasions (to avoid using those credit cards), and analyzing where you can reduce your expenses you need to use a tool to help you stay on budget.

Every year I buy a simple twelve month calendar that has two pages per month so the blocks for each day are a good size. Each month I analyze and plug in income (for me it's my husband's paycheck) and all bills. His check is twice a month so I write in the amount on the calendar day he gets paid and then write in my bills, grocery budget, gas money, etc to pay for the month between the two paydays. I also to the side margin for each payday then subtract that two week period of bills and expenses from the income (his check) and then from what is left subtract our budgeted amount of spending money for the next two weeks. This keeps me on track to stick to our spending and saving budget.

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