by Laurie Childree

Created on: March 24, 2009   Last Updated: April 02, 2009

The ability to set up a sensible budget is a valuable tool that everyone can benefit from not just those on a limited income. Even those with a considerable amount of disposable income can find that having a budget that is sensible can make their income stretch farther than they ever imagined. So how do you set up a sensible budget? Learning the basics of personal budgeting has to be done if you are going to attempt any kind of budget that is a realistic reflection of what you can afford.

It is rather simple to set up a sensible budget; for starters if you don't make over $1,000 in a month there is no way for you to truly save a $1,000 in a month's time. So making sure you have an accurate sense of the amount of money that you bring home each month will make having a sensible budget much easier. You also want to be sure that your expenses are less than your income. Not including items such as a tax refund which are better off saved will help you to resist the urge to over spend.

Including all those expenses that occur on an infrequent basis with a monthly average for each will help you to see if you are truly living within your means or not. If including these expenses averaged out puts you over your monthly income then you don't have a sensible budget and should look into ways to lower these expenses and your regular expenses. You must also be willing to distinguish between your needs and your wants.

When you know what is actually a need and what is strictly a want then you will have more success with the creation of a sensible budget. Items such as rent, food and clothing are needs while items such as cable, Internet and a brand new car are wants. While having cable is nice if it cuts into your food budget you shouldn't subscribe to it. The same goes for your Internet connection, if you can't afford it then utilize the free services at your local library.

You must set goals for yourself if you wish to include an extravagant holiday or other purchase into your budget. Goals should be broken down into smaller aspects so that you know when each step has been accomplished. This way you can set an amount to put aside each month into your budget.

There are some other items that should be included in your budget in order for it to be sensible as well. Eye exams and annual doctor's visits are two things that most people over look when they make out their budgets. Including these in the budget especially if you have a problem with your eyesight will keep you from having unforeseen expenses that cause your budget to fail. When you live paycheck to paycheck a sensible budget keeps you living within your means and ensures that you have some money set aside for emergencies and those bills that only come in occasionally.

So remember make sure that it's an actual need, you make more than you spend and you set some money aside for the unknown. All of this combined is how you create a sensible budget that allows you to have a feeling of financial security.

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