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Creating a personal budget

A healthy financial future, doesn’t happen by accident. The way you get there is by setting and sticking to a budget. The information below shows how easy it is to set up a budget, which is the first step to take control of your spending and allowing you to own your financial future.

Step one: How much money do you earn?

The old saying, “live within your means” starts with understanding of understanding your means, or how much money you earn. If your take-home pay check is $3,000 a month, that is your means. You should not spend more than $3,000 a month.

Step two: Identify regular expenses (fixed expenses)

Rent, auto insurance, cellphone bill, garbage bill, utilities, and loan payments generally cost the same each month. Those are regular and fixed expenses. They come every month and the price is fixed, or unchanging. These expenses establish the foundation of your budget. The money you have after your fixed expenses is where your budget adventure begins!


Rent: $1,200
Auto Insurance: $80
Cell phone: $100
Garbage: $25
Utilities: $225
Loans(auto): $180
Total: $1,810

Step three: Identify random expenses (variable expenses)

Food, gas, eating out, phone apps, online purchases, clothes, entertainment are all costs that change from month to month. Random expenses are also driven by our personal desires and change bases on our level of interest month to month. This is also where we all usually end up in money trouble.

Step four: Establish fixed prices for those random expenses

This is the fun part. Rather than just bouncing around financially speaking, this step is the most empowering and life changing and it is really easy to do because you are calling the shots. It is totally up to you. You are in control.


Food: $200
Gas: $80
Dining out: $100
Phone apps: $50
Online purchases: $50
Clothes: $200
Entertainment: $75
Total: $710

Step five: Keep track

Do you drive to an unfamiliar place without using your phone’s GPS app? Do you cook a new recipe without checking the steps constantly? A budget is no different. The trick to following a budget is to keep track of how you are spending your money and make sure you are sticking to your plan.

Step six: Reward yourself

At the end of the month, if you have stayed within your budget, and you have some money left, you should do something to reward yourself. Go out to eat, order a pizza, go to the movies, or buy some new shoes. You have earned it.

Step seven: What to do with the extra money

In the example above, you’d have $480 left over at the end of the month.

Debt is the opposite of financial freedom. There is also little advantage to having a huge savings, yet be up to your neck in debt. It is recommended that you take what money you have left over and put it towards any unexpected expenses; don't forget that $20 you owe your roommate for covering your dinner the other night when you forgot your wallet.

If you don’t have any debt, congratulations. You are among the few, the proud, the financially brave. You can put the extra money into a savings account for a big expense later like vacations, a much needed car repair, or that new phone you have been dreaming about.

Tools to help:

Building a simple spreadsheet can help you get started. There are also many phone apps that can help you stick to your budget. Here are a few worth checking out:

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