The most important aspect of setting up a budget is to have a plan. The basic parts of your plan are to list all sources of income, all your expenses, any occasional expenses you have throughout the year, and then compare your income and expenses to see where you stand.
Use worksheets, such as those listed below, to set up your spending plan.
List income- List all sources and amounts of income available for spending and saving each month (take-home amount after taxes and other deductions). Include only income you know for sure you will be receiving. If your income changes from month to month, use past income amounts to get an average. Sources of income include: wages and salaries, bonuses and commissions, interest/dividends, alimony & child support, disability, workers compensation, unemployment compensation, tax refunds, pensions/annuities, scholarships/fellowships, Social Security, Earned Income Credit, FIP.
List monthly expenses- Use past bills, canceled checks, and receipts to determine how much you spend each month. List all of your expenses, especially small amounts.
List occasional expenses- List expenses not paid on a monthly basis such as car registration, Christmas and birthday gifts, insurance, school supplies, club dues, subscriptions, taxes, etc. Total the amount of these expenses and divide by 12. Set aside this amount each month to cover these expenses.
Balance income and expenses- Add up your expenses and compare to your income. If your expenses are more than your income, review to find places to spend less.
