6 Steps to Creating a Budget

Andrea Pokorny writes about money and home management at MainstreamMom.com. She has been published in Reader’s Digest and contributes to websites like EverythingMom.com. She is passionate about delivering tools and resources to help women everywhere with the toughest job on the planet as mothers.

Visit her site and receive her free workbook titled “7 Simple Steps to Managing Your Money (That You Can Actually Do)”.

Creating an effective budget that lasts can be a challenge. Let’s face it. Budgets can be exhausting and intimidating and they require a lot of attention. Much like our kids.

The big difference? Budgets won’t tell you they’re hungry, tired or need to go the bathroom. They won’t poke at you while you’re trying to have a conversation on the phone. Budgets don’t ask for attention.

But that doesn’t mean a budget isn’t an important part of the family. In fact, a budget is an essential component of a family’s healthy financial plan.

Don’t give up on your budget. Reap the rewards:

• Achieve your goals
• Improve financial communication in your marriage
• Get control of your finances and tell your money where to go

You can find contentment on any income and you will be well served to live on a budget. Your budget is the rock upon which your financial life is built. Think of it as your foundation. It’s your plan for spontaneity. Your plan for the unplanned financial roller coaster life hands you. It will help you cope with financial problems.

And, an effective and efficient budget will take you only one to two hours a month to manage.

Here are the initial steps to create a budget. It’s a process, but the good news is there’s no such thing as a failed budget. This is your pathway to financial success, so never give up:

Step 1: Write down your financial goals.

Having goals is essential to tracking your progress.

Maybe your goals include debt freedom, building savings, or giving extravagantly. Whatever they are, take the time to think about your short term and long term goals. Write them down. These are your financial motivators.

Step 2: Record every single purchase you make, without exception.

Think of this as your budget prep.

No dollar should escape accountability. Record every dollar that leaves your pocket. Underestimating your spending is one of the greatest budgeting blunders. Knowing your spending habits will put you on the right track.

Step 3: Create your spending categories.

Here is where you will give your dollars purpose.

In addition to the obvious categories, list all larger non-monthly expenses (life insurance, birthdays, car repairs). Think of those big things that happen that you can plan for financially (property taxes, holidays, car insurance).

Don’t forget a “fun money” category or miscellaneous. You need to give yourself some breathing room.

Step 4: Hold a budget meeting (yes, with your spouse).

Budgeting is a meeting of the minds. It’s about healthy negotiation, compromise and respect. Here is where you will agree on how many dollars should be allocated to each of the spending categories.

This meeting should be short (and friendly).

Step 5: Schedule time to create your budget.

Determine the budget method and tools you will use and start your budget.

Think about your personality.You can use pencil and paper, software, envelopes, dry erase board, whatever. Just make it user friendly and, preferably, cheap.

Step 6: Tweak your budget at the beginning of every month.

Be adaptable and flexible. Budgeting should be a life long habit. Don’t quit.

Live within your means with the help of your budget. You’re sure to find financial peace of mind.

6 Steps to Creating a Budget