So the month is almost over and you should have a good idea about your additional expenses from the spending record you kept this month. Now it’s time to make a budget.

Budgets aren’t as dreadful as they may initially seem. A budget will help you keep your spending in line so that you don’t have the panic of not having enough money at the end of the month.

Review the spending records that you keep for the month. Remember the small notebook I told you to buy to keep track of everything you bought this month. A careful assessment of this record might show you that you spend more money on some things that you might have thought. Try to figure out what can be cut out or just reigned in a bit.

For example, you might find that taking lunch to work would save you money. You don’t have to stop eating lunch out with colleagues completely, but you should reduce it to a weekly or even monthly affair and bring your own lunch to work on the other days. Besides saving you money, you’ll find that packing lunch is usually healthier than what you get in restaurants.

Now budget out how much money you need monthly for bills, food, transportation, entertainment and miscellaneous. It’s good to have a miscellaneous category because you never know what might come up. If you find that you’re spending more than you earn you need to taper down the entertainment and miscellaneous categories. There might be things in your life that are luxuries disguised as necessities, like cable for example. Figure out what luxuries you can cut out to make your budget work.

You don’t want to have every last cent you earn spent in this budget. You should have about 10% left over to put in a savings account. Saving 10% of your income every month adds up over the years and is a good habit to have.

Start paying for things in cash. I don’t know about you, but for me there’s something about actually taking the cash out of my wallet that makes me consider more thoughtfully whether or not I need the thing I’m  purchasing. You might want to use your card to put gas in the car because it’s more convenient, but for other food, entertainment and miscellaneous you can pay in cash.

Leo at Zen Habits said that he kept envelops in his house marked with each category in his budget and the amount of money allotted for that category that month in the envelop. When the money was gone nothing else could be spent on that category for the month. I’ve never done this but it sounds like a good idea, especially, if you tend to go over budget. Here’s his article about finances.

Now that you’ve started these new habits and have a budget you’re on your way to getting out of debt and having a happier financial life. Congratulations!

Photo by stopnlook

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