Do you want to create a budget? That’s great—you’re already one step ahead of the game! Not many people create a budget, but everyone needs one. Many people carry around a lot of financial stress, often centered around uncertainty and debt. The uncertainty can be tackled by creating an emergency fund, while paying down your debt becomes more manageable when you create a budget.
A budget will help you improve your financial situation, regardless of where you stand now. Whether you’re rich or poor, having a budget can benefit you. It helps you pay off debt, reach your financial goals, and highlights areas where you can improve.
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### Helpful Budget-Related Articles to Get You Started
– [5 Reasons Why You Need To Budget](#)
– [Pay Yourself First](#)
– [Hacking Financial Freedom](#)
– [5 Simple Steps to Check Your Financial Health](#)
– [How To Create A Fail-Proof Budget That Works](#)
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## How To Create a Budget That Works: 5 Simple Steps
### Step 1: Decide Whether You Want Your Budget Electronic or on Paper
Everyone has a personal preference when it comes to budgeting tools—some prefer electronic versions where changes are easy to make, while others like pencil and paper. Decide which option you want to try first. If you later find that the other option suits you better, that’s okay! You can always switch.
The most important thing is that you create a budget and stick to it.
Check out my free resource library to get a **monthly budget printable**, which you can use to create and track your monthly budget. The “Budget” column is what you plan to spend each month, and the “Actual” column is what you actually spent. Tracking these consistently each month will help you identify areas for improvement!
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### Step 2: Track ALL Your Income and Expenses
Creating a realistic budget requires knowing exactly what money is coming in and going out each month. Gather all your receipts, bank statements, credit card transactions, and other records.
Alternatively, track every single transaction for an entire month with notes on what each purchase was for. At the end of the month, evaluate your spending. I recommend this method because it’s the best way to create a realistic budget—you’ll finally see where your money is going!
The results might be shocking, but don’t worry. You can adjust your budget allocations for each category accordingly. If your actual expenses are too high, try cutting your budget for a month to identify potential savings.
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### Step 3: Budget Your Income
Your income can come from various sources including your day job, side hustles, dividends, rental properties, and other passive income streams.
One key thing to consider is **how often you get paid**—some people receive paychecks every two weeks, some every four weeks. This affects how much you actually earn each month.
Be cautious when budgeting variable income such as bonuses or fluctuating passive income. If you are not 100% certain that you will receive this extra income every month, it’s best not to include it in your budget. Making your budget as realistic as possible will keep your finances on track.
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### Step 4: Budget Your Expenses
When budgeting, focus on **actual expenses** rather than estimated ones. Estimates can be far off and could make your budget inaccurate.
Here are some key categories to include in your budget:
– **Savings:** Emergency fund, holiday savings, retirement contributions, investments—set these aside first.
– **Housing:** Mortgage or rent, maintenance, property taxes, insurance, utilities.
– **Car:** Payments, gas, insurance, maintenance.
– **Food:** Groceries and dining out—this is often where people overspend without realizing.
– **Health Insurance**
– **Television:** Cable, Netflix, and other subscriptions.
– **Internet**
– **Phone Plan**
– **Entertainment:** Concerts, nights out, and other activities outside the home.
– **Clothing:** When you’re not on a clothing ban.
– **Gifts**
– **Charity**
– **Miscellaneous:** Any uncategorized or irregular expenses.
[Related Read: 25+ Incredible Easy Money Saving Tips]
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### Step 5: Adjust Your Budget When Needed
Setting up a budget is not a one-time task—it requires regular review and adjustment. You don’t need to check your budget every day; every week or month is sufficient, whichever suits you best.
If you experience significant changes in your income, expenses, or financial goals, update your budget accordingly. This keeps your budget realistic and effective.
[Related Read: 5 Reasons Successful People Wear The Same Clothes Every Day]
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Creating and sticking to a budget is a powerful tool that will help you reduce financial stress, pay off debt, and move confidently toward your financial goals. Start today, take it one step at a time, and watch your financial health improve!
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