by Tricia Psarreas Murray

Created on: June 11, 2009

In the age of credit card bills and technological fees, it can seem like you spend more money than you earn. If you want to pay your bills, have some fun, and have leftover money to spare, a household budget could be the answer to your problems. These step-by-step instructions will teach you how to assess your monthly expenses, eliminate unnecessary expenses, and create a budget that will be easy to follow.

1. Record your expenditures and transactions for one month.

Before you can create a budget, you must know your monthly expenses. You can keep track of these expenses by keeping a financial journal. Each time you spend money, record the transaction in your journal. Write the date, amount of the transaction, and source of the transaction each time you spend money.

At the end of the month, organize the information in your journal. Categorize each of your transactions based on what your money purchased. Separate your bills from your personal expenses so you can keep track of which areas require the most money.

2. Analyze your spending habits.

Now that you know how to record your expenditures and transactions, you must analyze your spending habits. First write down your essential expenses. These expenses include all of the things you require in your life. This category includes things like rent, utilities, transportation costs, medical expenses, credit card payments, food, and telephone service.

Next write down your personal expenses. These expenses include all of the things you like to have, but do not require. This category includes things like clothes, school, entertainment, vacations, personal outings, cable payments, and Internet connections.

3. Eliminate your unnecessary expenses.

Once you determine where your money goes, you can probably identify numerous unnecessary expenses. You can eliminate these expenses in two ways. First, you can cut out double spending. Look through your journal and see if you are paying for two services in different ways. Identify the amount you pay on your cable bill versus the amount you pay for video rentals. If you rent a lot of movies, it is not necessary to pay for an expensive cable package. Similarly, compare your house phone bill to your cell phone bill. If you barely use your cell phone, you do not need an expensive cell phone package. Also keep track of your food expenses. If you shop for a week's worth of groceries, but you eat out four times a week, you will probably waste a lot of

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