by Benjamin Lomax

Created on: December 14, 2009   Last Updated: January 09, 2010

In an economy where income increasingly rarely exceeds expenses, it is crucial to have a framework to save rather than to spend. A recent study pointed out that American debt now exceeds all the wealth that currently exists in the entire world! But there are some very basic ideas you can use to save money and keep yourself out of debt.

Step 1: Analyze and classify expenses

The first step to creating an effective budget is to itemize and categorize the payments you are making every month. Most spreadsheet programs have basic budget formats, or you can purchase something a bit more user-friendly, like Quicken or MS Office. But all you really get for your money is a handier system to do the same thing. Some premium editions will actually pull your electronic payments (even checks) from your on-line banking site and plug them in for you, but these systems are still rife with mistakes, and it is recommended that you double check all entries, particularly when you first begin using the program.

Very basic categories will serve well, as strongly specific classifications (like breaking grocery bills down into what grocery stores you go to) are counter-productive, and will only make the budget more labor-intensive and no more valuable, not something you want if you plan on sticking with a budget. Household expenses (utilities, phone, and trash), credit debt, vehicles (including gas and maintenance), home (mortgage, property taxes, insurance, etc.), education (including student loans), food (groceries, restaurants), clothing, and recreation (movies, vacation, sports equipment, books) are all tried and true basic categories.

Note that for some payments, an expense can be categorized in more than one class. For example, cable might be a household expense or recreation, depending on its importance to you. This to be truthful needs to be categorized where you think it is appropriate. It isn't terribly important what category your expense fits into, it's much more important that you include everything and only put each item in once, or the budget will be skewed.

Also it is very important that you enter expenses for several months, at least six months is the recommendation. This eliminates singular high amounts (credit card usage during Christmas, clothes and books for students in the fall) or large variable amounts (heating bills in winter, etc.). If you have a budget that only works during the summer, saving money during the winter will be a

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