by Marco Angioni II

Created on: March 22, 2010

Saving money can help you in many ways.  Saving money can help you support your retirement, can help you pay for large expenses, and can help you achieve certain financial goals.  However, saving money is not always easy.  Many times, unexpected bills can creep into your life and throw off all of your financial plans.  However, creating a budget will help you manage your current financial situation, will help you survive the unexpected finances, and will help you create a savings plan.  You can easily set up a budget to take advantage of these benefits.

The absolute first thing you must do to set up a budget is to gather all of your financial statements.  You have to compile all of your bank statements, all of your bills, all of your receipts, and any other financial statement that may be useful in preparing a budget.  Once you have compiled all of these things, you are ready to prepare your budget.

Start by calculating your entire monthly income.  Consider only your take-home or net pay (meaning your money after taxes), not your gross pay.  Consider any consistent bonuses or other type of compensation.  However, and this is important, do not consider random, sporadic, or irregular monthly income that you may receive.  This money is not reliable and therefore, if you rely on it, your budget may come up short that month.

After you have accounted for all of your monthly income, it is time to account for all of your monthly expenses.  When considering expenses, consider every expense that you have each month.  This means all regular bills as well as shopping, entertainment, gasoline, and other expenses that you incur every month.  Be honest when doing this part.  Do not account for $50 worth of groceries when you know you actually spend closer to $100.  By underestimating your expenses, you will not be able to properly plan for savings.

Once you have done these two things, calculate the difference between the two.  By doing this, you will know how much money you have left over each month for savings.  If you do not feel that you have enough money left over for savings, or if you do not have any money left for savings, your goal at this point it to cut unnecessary expenses.  Cutting back on unnecessary expenses does not mean that you simply change numbers on your budget sheet.  Cutting expenses means that you actually stop spending money on certain items in order to free up money for your savings.

Remember, setting up a budget can be achieved in a few simple steps.  Compile all of your financial information and account for all monthly income and all monthly expenses.  After subtracting your monthly expenses from your monthly income, you will know how much you have left over for saving.  If there is not enough money left over, start cutting unnecessary expenses to create more cash.

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