Creating A Budget

Being in control of one’s finances requires discipline, persistence, and a clear understanding of “wants” vs. “needs.” You have to determine your values and set goals. By understanding what your “values” are, you can establish a budget that provides you with the most satisfaction. When creating a budget, be sure to create a realistic one that you will be able to stick to.

1. Make a list of your wants and needs.

  • Needs are essentials, such as a place to live. Wants are those things you desire that improve your quality of life, like a stereo.
  • The wants and needs you determine are your values.

2. Set your goals.

  • Goals are mini-steps that help you maintain your values – such as establishing a savings account to save for a stereo purchase. What are your goals?
  • When you take the time to establish short and long-term goals and commit them in writing, it is easier to accomplish those goals.
  • Make separate lists of your goals for the next three months, the next year, and the next three years. Your list for each time period does not have to be the same.

3. Determine your income.

  • Figure your available income, based on your net pay, which is those dollars you actually receive after all deductions have been made.

4. Determine your expenses.

  • Review account statements, credit card statements, store receipts, etc. to see where your money is going.
  • “Fixed expenses,” such as rent, auto or student loan payments, are easy to determine.
  • “Flexible expenses,” such as food, clothing, and entertainment, vary from month to month. Start keeping your receipts.
  • Don’ forget about expenses such as gym memberships or insurance, that are billed quarterly, semi-annually or yearly.

5. Create a spending plan.

  • Design a spending plan that meets your “wants” as well as your “needs.”

6. Pay yourself first!

  • Start an emergency savings fund equal to three to six months of your normal monthly earnings.
  • After you have an emergency fund, monthly savings can be set aside for vacations, a new car, or marriage – important but expensive goals!

Additional Tips for Establishing Yourself Financially

In addition to creating your budget, these tips can help with your personal finances:

  • Open up checking and savings accounts. Don’t overdraw these accounts.
  • Apply for a major credit card to help establish credit and learn to use it wisely.
  • Use gas and retail cards responsibly and sparingly.
  • Protect yourself from credit card fraud. Sign your card right away. Don’t leave your card lying around. Don’t let friends use it. Shred your receipts.
  • Protect yourself from identity theft. Familiarize yourself with safe computing practices.
  • Make your monthly loan payments on time each month. Pay at least the minimum …more if you can. Never skip a payment.
  • Promptly pay for monthly services, like your phone bill. And never leave utilities in your name if you move. As long as your name is on the bill, you are responsible for paying it.

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