The creation of a budget is the first step in gaining control of your finances and saving for your financial goals. A budget is simply a calculation of your income and expenditures over the course of a month. It helps to allocate money for your needs while preventing overspending and waste.

1. Calculate your monthly income (after taxes).
2. Allot money for your priorities (housing, utilities, medical, food, and savings). Note: if you do not have adequate medical coverage, start a special savings account to cover medical costs.
3. If possible, try to stretch your bills out evenly over the month so that you are paying out approximately the same amount and that there is no week when all of your money is needed for bills. You may request a change of you due date to spread bills out more evenly.
4. Next, allot money for necessary bills, such as insurance, loans, credit cards, child care, etc.
5. For large, non-monthly expenditures (insurance bills, car repairs, Christmas, etc.) place an amount of money aside each week so you have money to pay the bills when they are due.
6. Next, allot money for other expenses, such as gas, cosmetics, non-food groceries, recreation, etc. Only allot the minimum amount of money you need for these things (it is very easy to overspend in this category).
7. If any money is leftover, add it to your savings. A few dollars here and there will add up. Note: Your figures may not add up correctly the first time you try it. Revise your plans until a working budget is reached.

Here are some guidelines on how much of your monthly income should go to various expenses:

• Housing (rent/mortgage) 20 - 35%
• Utilities (gas, electric, water, trash, & phone) 4 - 7 %
• Food (at home & away) 15 - 30%
• Family Necessities (laundry, toiletries, hair care) 2 - 4%
• Medical (insurance, prescriptions, bills) 2 - 8%
• Clothing 3 - 10%
• Transportation (car payment, gas, insurance, repairs, or bus fare) 6 - 30%
• Entertainment 2 - 6%

An important step in reviewing your financial plan is to keep track of your spending. There is no way to compare projected spending with actual spending unless accurate records are kept. Spending plans require recording and checking.

1. Keep a daily log of where and how much money is spent.
2. Compare that list to your proposed monthly budget.
3. How close are you? How much of that spending was unnecessary?

Now that you have tracked your expenses, ask yourself: "Where can I reduce my spending?" Budgeting often requires cutting expenses. This is where they get cut.

Give yourself the third degree. Ask yourself these questions:

• Do I really need it today?
• What would happen if I don't buy it now?
• Can I buy a cheaper substitute?

Review the Cash Crunch Tips.

A budget must be reevaluated often to meet the needs of your changing family. As your family changes, so will your needs and expenses. When your proposed budget isn't working, reevaluate and try to gauge expenses more accurately. No budget is perfect. Keep on trying. If you consistently have problems with this, give the Consumer Credit Counseling Service a call for free budget counseling.