The happenings "inside" the Wisconsin State Treasury and across the street at the State Capitol

Money Matters: How to establish a Budget


This post is from our friends at Practical Money Skills and offers a great deal of information on how to establish your BUDGET.

A budget is a plan for your  guideline for spending and saving. The majority of Americans routinely spend more than they can afford. The key to spending within your means is to know your expenses then spend less than you make. A good monthly budget can help you pay bills on time, have funds to cover emergencies, as well as reach financial goals.

To create or rework your budget, follow the simple steps outlined below to get a clear picture of your monthly finances. You can also use our free online budgeting calculators below to budget for certain specific purchases or events.

1. Add Up Your Income
To set a monthly budget, first determine how much income you have. Using the worksheet at the bottom of this page, write a dollar figure next to each relevant income source. Make sure you include all sources of income such as salaries, interest, pension and any other income–including a spouse’s income if you’re married.

If you get a salary, be sure to use your take-home pay rather than your gross pay. Taxes are usually taken out automatically, but if they’re not, remember to include them as another expense. If you receive money from somewhere not listed, enter the source along with the amount under “other income.”

2. Estimate Expenses
The best way to do this is to keep track of how much you spend for one month. The worksheet below divides spending into fixed and flexible expenses. Fixed expenses are those that generally do not change from month to month, such as rent and insurance payments. Flexible expenses are those that do change from month to month, such as food or entertainment. If some of your expenses for one or more categories change significantly each month, take a three-month average for your total.

3. Figure Out The Difference
Once you’ve totaled up your monthly income and your monthly expenses, subtract the expense total from the income total to get the difference. A positive number indicates that you’re spending less than you earn–congratulations. A negative number indicates that your expenses are greater than your income. This means you will need to trim your expenses in order to begin living within your means.

Well done–you’ve created a budget. The next step is to track your budget over time to make sure you’re sticking to it. If you find you aren’t able to follow your budget successfully, it may mean that your plan isn’t flexible enough. It can take revisiting your budget a few times to find the balance that works for you.

Download Budget Worksheet (pdf)

Access Budgeting Calculators

Advertisements

One response

  1. Some great points and resources there! Thanks a lot for linking back to our blog as well, much appreciated.

    -Rachael (Moneyfocus)

    August 28, 2012 at 3:16 AM

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s