Money Management Made Easy: Organize Personal Finances With a Budget

By Dawn Handschuh, Personal Finance Writer   

Are you having trouble reining in household expenses? Are your paychecks spent before they're earned? Worried about paying down credit card debt?

To regain control of your personal finances, you must spend less than you earn. Without a budget, though, you can only guess your monthly expenses.

By helping you analyze spending patterns, a budget puts you in the money driver's seat. But it's not enough to say, "I think we spend $300 a month on groceries." Track your actual expenses to the dollar so you know exactly where you stand.

  1. Record every expense for three consecutive months.
    This will become habit soon enough. But you must account for every dollar spent. You're building your budget based on actual spending, not wishful thinking.

Tip: Don't overlook purchases lacking receipts (restaurant tabs, impulse lattes)

2. Create categories for your expenses.
Record them on a spreadsheet. Sample categories include:

Fixed:

  • Mortgage/rent
  • Medical
  • Telephone
  • Internet
  • Cable TV
  • Trash pickup
  • Childcare

Variable:

  • Food
  • Heat
  • Electricity
  • Entertainment
  • Vacations
  • Clothing
  • Commuting

Tips:

    • Separate fixed expenses (those that don't vary) from variable expenses (those that fluctuate; you can control these).
    • With once-a-year expenses like car insurance, divide annual payments by 12, and include them as a monthly expense.
    • If your categories are too broad, you'll bury hidden expenses. So list the Bertucci's dinner under "Dining out," not "Food."
    • Download free budget-planning templates online,and customize accordingly.
    • Credit card issuers may move your monthly due date if asked. Set up the same due date for multiple cards to help make bill-paying systematic.

3. Calculate average monthly expenses.
This is your budget.

4. Subtract average monthly expenses from total monthly income.
This is what's left to spend or save. Let your budget — not impulse — determine your discretionary purchases.

If you're in the red, scrutinize your budget for areas to economize. Separate needs from wants. Avoid impulse purchases.

Tip: If you carry credit card debt, determine how much you can pay off monthly, then make payments like clockwork. Pay off cards with the highest interest rate first.