Five steps to developing a budget

June 22, 11:38 PMWomen of the Web ExaminerBrit Horvat

Previous Next

Comment Print Email RSS Subscribe

Subscribe

Get alerts when there is a new article from the Women of the Web Examiner. Read Examiner.com's terms of use.

Email Address   Include other special offers from Examiner.com Terms of Use

Valorie Simpson, your go-to gal for all things money and finance, is back with more advice. Every other week or so, you'll find her debunking moolah myths and answering your financial questions here. Got a pressing question you'd like answered by Valorie? E-mail it to brithorvat@gmail.com.
 

Valorie Simpson is president of Colorado Business Bank Northwest
in Louisville.
 

Gino:

My wife shared your article with me. We are currently trying to develop a budget. Are there any areas that we should pay particular attention to? Any advice on strategies to really stick to it?

Valorie:

Gino, most people are overwhelmed by the thought of creating a budget because of the perception that it takes a lot of time to put one together. Let me give you a few easy tips to get started, and you and your wife can add more detail as time goes on. During this process, keep telling yourself, “A budget does not constrain me, it leads me to financial freedom.”

 

1. Start today.
2. Determine your joint spendable income (after taxes). 
3. Calculate housing expenses, and try to keep them around 40% of your spendable income. These include mortgage or rent, utilities, insurance, real estate taxes, HOA dues, and upkeep. 
4. Next, add food, auto (don’t forget gas and maintenance), debt obligations and childcare. Look very closely at your food bills. In my experience, eating at home can cost up to 4 times less than dining at a restaurant!
5. Last of all, write down how much you spend on clothing, savings, medical, school, entertainment, vacations, retirement and other categories.
    

If you are spending more than you are making, look at each area and try to shave dollars in all categories. Keep in mind: housing costs are your biggest expense. Don’t be afraid to downsize your home; you'll save much more than the mortgage payment.

Where do you start? Don’t go back a year, like many experts recommend. Why? You probably won’t do anything. Begin with last month’s bank and credit card statements. After your initial budget is started, keep adding more details throughout the year as you deem necessary.

Remember, start your budget today to begin the road to financial freedom.