by Bethanny Davis

Creating a budget is the first step to successful money

management. How can you manage your money if you don't know how

much you have or what you're spending it on?

A budget has two parts, income and expenses. The object is to

keep your expenses at or below your income. Sounds easy, but as

we all know, it can get a little tricky sometimes.

STEP 1: LIST YOUR EXPENSES

OK, get out a sheet of paper. Yes, now. If you wait until

later,

you might never get to it. Got the paper? Good. Use the

following list as a rough guide to list your expenses.

If you are not sure of the amount, go back through your

checkbook for the past few weeks or months to get an idea. For

items you pay cash for, such as fast food, think about how many

times per week or month you normally spend money on that item

and how much you pay each time.

HOUSING & UTILITIES

-Mortgage payment or rent

-Insurance

-Taxes

-Electric

-Natural gas

-Water

-Garbage pick-up

TRANSPORTATION

-Car payments

-Insurance

-Gas

-Routine Maintenance

-Repairs

-Air travel

-Rental cars

-Public transportation

COMMUNICATION

-Telephone

-Cellular phone

-Voice mail, etc.

ENTERTAINMENT

-Cable TV or satellite service

-Internet access

-Dining out

-Bars, clubs, etc.

-Sporting events

-Parties

-Lessons and recitals

-Clubs

HOUSEHOLD

-Groceries

-Cleaning supplies

-Laundry

-Dry cleaning

-Home improvement projects

-Towels, linens, etc.

-Clothing

HEALTH/BEAUTY

-Hair cuts, perms, etc.

-Make-up

-Medical, dental, vision

-Weight loss, diet products

-Nutritional supplements

OTHER

-Credit card payments

-Other loan payments

-Child care

-Items for baby/elderly

-Allowances for children

-Book clubs, magazines, music, etc.

-Fast food

-Investments

-Vacation

-Spending money

-Donations to church or charity

-Gifts (Christmas, birthdays, wedding, baby shower, graduation,

anniversary, etc.)

-Emergency fund

-Coffee, soda, cigarettes, etc.

If you've been making your list, it's probably pretty long by

now, but stop for a minute and try to think of anything I might

have missed. Is there anything special you need for work? For

school? Do you have a hobby you spend money on? If you buy a

new lens for your 35mm camera every year, you better put it in 

your budget.

STEP 2: ADD IT UP

Now that you have your list of expenses, go ahead and add them

up. Figure all expenses as a monthly amount. For example, if

your property taxes are due once per year, divide the amount by 

12 to get a monthly figure. If your expenses are lower than  

your take-home income, skip to step 4. If not, continue on to 

step 3.

STEP 3: CUTTING BACK

Most likely, you have more "I wants" than you have money for,

or you wouldn't be reading an article on how to create a 

budget. Deciding what to cut is the hardest part of making up 

a  budget. Start by determining how much you need to trim. To  

do this, subtract your income from your expenses. If your 

take-home pay is $2000 per month and your list of expenses came 

to $2200 per month, you need to trim $200 per month. The figure 

may seem daunting at first, but if you look hard enough at your 

expense list, you can usually find a few items that are easy to 

cut. I can't see your list, so I can't tell you what to cut, 

but here are some suggestions.

SUGGESTIONS FOR CUTTING BACK

-Eliminate cable/satellite service or cut back on extra

subscription channels.

-Switch to a free internet access provider if you are paying

for internet access.

-Cut back on smoking if you can.

-Cut back on caffeine if possible. Drink water.

-Take lunches to work instead of eating fast food.

-Shop around for cheaper home and auto insurance.

-Use coupons and online services to save money on groceries.

-Rent videos instead of going to the movies.

-Turn down the water level on your washing machine and

dishwasher if it is adjustable.

-Turn the lights off.

-Turn the heat or air conditioning down while you are not home.

-Don't overheat or overcool when you are home. If you can stand

it at 80 degrees in the summer, don't turn the A/C to 67.

-Find a bank with a no-fee checking account if you don't have

one.

-Research the 10-10- access codes for long distance. You should

be able to get long distance for about 5 cents per minute.

-Talk on the phone less. You have a free ISP, right? E-mail as

many people as you can instead of calling. Talk everyone you

know into getting ICQ so you can chat or send messages back and

forth.

STEP 4: WRITE IT DOWN!

You're almost done! You know how much money you make, and you

have trimmed your expenses to match that income. Now what?

Write

it down. Wait, let me say that again in case you missed it -

WRITE IT DOWN! If you don't, you probably won't stick to it.

I have a section in my daily planner for my budget. There is

one page for each paycheck. At the top of each page, I write 

the date that I will be paid. Below that, I list everything 

that needs to come out of that check.

To do this, you need to divide your expenses as evenly as

possible. If your largest bills are all due at once, move some

up and pay them a little early, rather than trying to fit them

all into the same pay period.

SAMPLE BUDGET

As promised, here is a sample budget to use as an example. This

sample is based on a bi-monthly pay period with a take-home

income of $2000 per month.

FIRST PAY PERIOD

Car payment $292

Car insurance $139

Day care $200

Electric $50

Natural gas $60

Phone $45

Personal debt $40

Cable TV $34

Groceries, etc. $80

Gasoline $40

Spending money $20

SECOND PAY PERIOD

Lot rent $332

Investments $200

Day care $200

Credit card $80

Groceries, etc. $80

Gasoline $40

Water $20

Gifts $10

Car maintenance $10

Spending money $20

Kids' allowances $8

Well, that's all there is to it. I hope you were able to put

together a budget you can live with and stick to. Just one more

little tip: When you're trimming down the extras, try to leave

at least one or two items you do just for fun. Otherwise you

may end up feeling deprived and toss the entire budget out. 

Good luck!

About the author

Bethanny Davis lives in Michigan with her two children. She

writes articles about money, parenting and relationships. She

also enjoys writing short stories and poetry. More of her work

can be found at http://writergirl.stormloader.com/.