Identify Your Goals—Both Short Term and Long Term. Record Your Income

The Five-Step Budget Process

Making a personal budget is simple: determine your monthly income, determine your monthly expenses, and then decide what you want to do with any left-over money—pay off debts, save for a car, even go out to dinner a couple of extra times each month. Designing your budget to meet your obligations, prioritize your spending, and attain your short- and long-term financial goals takes a little effort, but you will find it works, and once it works your life becomes easier to manage.

Step 1: Identify Your Goals—Both Short Term and Long Term

What are your financial goals? Are you planning to buy your first house, or a car? Do you have children who will be going to college? How will you fund a comfortable retirement?

Step 2: Record Your Income

How much income do you or your family bring home in a month? Besides your paycheck, do you have any other income, such as stock dividends?

Step 3: Determine Your Expenses

What are your regular monthly bills?

Rent or mortgage

Car payments

Insurance

Childcare expenses

Credit card bills

Utilities-gas, electricity, oil

What other expenses do you incur during the month?

Household items

Groceries

Clothing and shoes

Medical and dental bills

Be sure to also list expenses that are paid quarterly and annually. Don't consider discretionary expenses yet (money you spend by choice on things like entertainment, music, or going out to eat). For right now, write down only the things you must spend money on each month. If your expenses are greater than your income, you will have to increase your income or reduce your expenses to be able to stay out of serious debt. Read some suggestions on how to stay out of debt.

Small savings add up. For example, you might be able to do without eating lunch out every day, buying lattes twice a day, and so forth.

Step 4: Develop a Savings Plan

Now that you know your income and your expenses, how much money is left over for savings? How much do you have to save to meet your goals by the time they come up? And what about emergencies? Even a small contribution will build up over time. Put aside a small amount for discretionary spending, too—movies or going out to dinner occasionally. You won't stick to a budget that doesn't let you have a little fun.

Step 5: Use the Plan

Use your budget every day to get used to watching your money. There will be a lot fewer surprises if you follow a budget, and the surprises you do experience are more likely to be pleasant ones.

Tips to Decrease Expenses and Increase Income

If you are working with a budget, you may feel that it does not allow you to meet your financial goals in a timely manner. You may also find that each month your expenses outstrip your income. If you find yourself in this situation, you can either decrease your expenses or increase your income. Easier said than done, so here are some tips to get you on your way.

Decrease expenses

·  minimize bank charges by using ATMs from your bank

·  do not utilize “payday” loans – the fees are excessive

·  give up expensive habits like cigarettes and designer coffee

·  use coupons for food, dry cleaning, and other services you use often

·  borrow books/videos/CDs from the library; read and watch for free

·  refinance a debt over a longer period of time (e.g., auto loan)

·  consolidate your debts at a reduced interest rate (e.g., credit cards, student loans)

Increase income

·  sell items you no longer need

·  get a part-time job (check with your unit commander)

·  rent out the spare room

·  sell unsecured assets, which are things you have paid for in full and haven't promised as security to a creditor

The last resort

If you can't find a way to have your income match or surpass your expenses and you have accumulated so much debt that it seems hopeless, call a credit counselor and ask for help. If credit counseling doesn't help and there still appears to be no way to pay it back, you may want to declare bankruptcy.