A budget is simply a written plan of how your money works; what your income is from all sources, and what you plan on paying out every month from that income. A well-made budget always totals zero at the end of a given month because it leaves nothing to chance or happenstance.
In order to set up a budget first you will want to put your income at the top of a piece of paper or a spreadsheet if that is what you prefer to use. If you have multiple sources of income such as from being a two-income family, having an annuity payment or social security, list those on a separate line as income as well. Starting below your income(s) you should begin to list your expenses, starting with the most important - shelter, food and essential loan repayments and utilities. A sample budget beginning might look something like this:
Income - Job - $2,000
Income - Military Retirement - $1,600
Mortgage - $1,200
Groceries - $750
Car Payment - $350
Car Insurance - $75
Gas for car - $200
Electric bill - $150
Gas bill - $50
It's okay to estimate on irregular bills such as your electricity or gas, since you're not certain what they will be from month to month; just estimate a high average. Once you've listed the items that you feel you essentially could not do without on a month to month basis, next you should add in those items that, in an emergency, would be the first to get cut from your budget. This includes other bill and utility repayments.
Savings - $100
Credit Cards - $200
Phone bill - $75
Cable - $125
Eating out lunches at work - $200
"Fun Money" - $75
In our example above, you can see that the budget still leaves $50.00 per month unspent. Thinking very carefully about the types of expenses that come into life, we can decide to add a few small items that will take care of that:
Money for birthday gifts, etc. - $20
Clothing - $30
The sample budget is complete, and very flexible. In any given month if there were extra money left over from something that did not cost as much as anticipated, it could be put into the savings account or into the money for birthday gifts for that anniversary party coming up for your neighbors. Conversely, if there were ever a month where there was a shortfall, there are places where money can be taken out of the budget (clothing, money for birthday gifts, "fun money") that can help make up for the difference.
Keep in mind that no one makes a perfect budget the first time out - it takes practice and tweaking to make it fit for you. Don't get discouraged if everything doesn't "fit" your first month or two out and it needs to be changed. Just go ahead and change it and keep changing it until the budget works well for you and then stick with it.
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