The Lesson You Won’t Find in Class:

How to Plan and Stick to a Budget

The first thing you want to do is sit down and figure out your total income and expenses for the month. Get a blank sheet of paper and make two columns: label one 'income' and the other 'expenses'. Under income, include everything that you bring in including payroll, investment income, child support, alimony, and/or any other income you may have. Under expenses, list every expense you have and the amount you pay. Then total both columns and write the numbers at the bottom of the paper.

Now, compare the two numbers. If the expense column is greater than the income column, you have a problem. If it's less than the income column, you're going in the right direction.

The easiest way to actually make a budget is with a spreadsheet. For referential purposes, an excellent spreadsheet can be found at:

http://financialplan.about.com/cs/budgeting/l/blbudget.htm

The spreadsheet is quite in-depth and goes over every possible expense you could have. For beginners, this may be a little overwhelming; however, take a look at it anyway. It has a lot of good information broken down into simple categories and includes things you may not have thought of in your own expense category.

Next you'll want to actually figure out your budget. This means you'll need to determine what portion of your income goes to what expense. If you've been spending more than you're bringing in, you'll want to find areas that you can cut so that you're not exceeding your means.

Some categories will be the same every month, so when sitting down to budget, start with them first. For example, you know your rent is $600 and your car payment is $212. Under your budgeted amount, you'll write $600 for rent and $212 for your car. You are assigning that much of your income to those two fixed expenses.

Things like your electric bill are not fixed. So you have to determine how much money you can feasibly afford to spend on it. Be sure to consider the time of year and your usual habits. If you're a polar bear that likes the AC on 60 all day, budgeting $50 a month for electricity isn't reasonable. Look at your past bills and see what you've been averaging. Put that amount in your budget column.

Once your budget column is all filled in with what you plan to spend for the month, double check the total to be sure that it doesn't exceed your income. If it does, you'll need to tweak it so that you do not exceed your income. You may have to cut a little from entertainment or find ways to save money on your electricity and food bills. Once the numbers match up, you'll have a budget ready for the month. As you pay a bill, mark it off on your 'paid' column and then compare how you did. Did you spend more or less than your budget? If you went over, you'll need to find somewhere else to cut in order to keep your budget in balance. Ideally, you'll be looking for ways to save all month long that way you come in under your budget and can put the extra money in savings.

The hardest part about budgeting is actually sticking to it. There's no magical formula that teaches you how to do that, though. It's a matter of personal discipline. However, you'll have a better chance of sticking to your budget if you're realistic about your expectations. Don't think you can save a ton of money by cutting your entertainment category altogether. That's unreasonable and you won't stick to that. Everyone needs a little fun, so leave it in there. Be sure to reward yourself along the way. If you do especially well one month, treat yourself to something you enjoy. Positive reinforcement is the best way to stick to a budget!