Budgeting for Beginners: An Easy Guide to Getting — And Keeping — Your Finances on Track

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When it comes to your household finances, there is one unique tool that can help you stay out of debt, avoid late fees and penalties and keep your credit score where it needs to be. It’s called a budget.

The idea of a household budget can be intimidating or unpleasant. Fortunately, creating one that ensures you have enough money to cover your bills each month is less complicated than you might think. All it requires is taking an honest look at what you spend each month and what you earn.

The hard part is sticking to your budget once you’ve drafted it.

Eliminate the Fear

The first step is to realize that a budget is not mysterious. A budget is nothing more than a document that tracks your household’s income and expenses. You can use electronic budgeting software to create your household budget or you can use a pen and paper — whatever method feels right to you.

If you’re married or living with a significant other, you need to include your partner in your budget planning. Household budgets won’t work if you’re watching your pennies but your partner is blowing $5 every morning on expensive coffee.

Once it’s time to create your budget, you’ll need to have some important paperwork on hand, most notably your recent bank statements (preferably at least three months worth) and any paycheck stubs, rental checks or disability payment stubs that document your monthly income.

Itemize Your Income and Expenses

To start your budget, list specific types of regular monthly income. This will obviously include your monthly salary. Your budget should also include any rental payments you receive, child support or alimony payments, payments you receive for freelance work, monthly disability payments and any monthly fees you receive as a result of a legal settlement.

Now that you know exactly how much money comes into your household each month, it’s time for the trickier part — listing your expenses.

Some expenses are fixed, meaning the amount will not change from month to month. These include your monthly mortgage bill, car payment, student loan payment, monthly garbage service and rent. Other expenses vary each month. These expenses include the money you spend on groceries, your electric bill, your phone bill, gas for your vehicle, and whatever you spend on clothing and entertainment. Your budget should also include your savings, or money reserved to build an emergency fund. This way, if an emergency does occur, you won’t have to add more debt to take care of it.

What about vacations, special occasions or large once-a-year expenses, such as holiday gift-giving? An easy way to work those expenses into your monthly budget is to use BancorpSouth’s Savings Calculator. Simply input your savings goal, the time you have to reach that goal and some other pertinent information, and you can easily find out how much you save in your budget each month.

The key to budgeting is being realistic. Your budget isn’t realistic if you don’t budget any money for going to the movies, eating out or taking short trips. Are you really committed to not having fun for a year or more?

More importantly, you should also adjust your budget based upon any changes to your expenses or income. If your company cuts your working hours or you start saving for a summer vacation, you’ll need to factor that into your budget. If you pay off your car, you can put that money toward something else in your budget.

Make Your Budget Work

If you find that you’re blowing your budget every month, it might be time to make some changes — either to your budget or to your spending habits.

Maybe you’ve been unrealistic about how much you spend on clothing and entertainment each month. Adjust those budget items so they more accurately reflect how you really live.

Or maybe you need to change the way you spend. If the amount you currently spend each month outweighs how much you earn, you need to eliminate some of your expenses.