- 1). Add up your total monthly take-home pay and list this figure in a notebook.
- 2). Create a list of recurring monthly bills that you have agreed to pay, such as car payments, mortgage payments, utility bills, groceries, etc. Add and record the total amount of your recurring monthly bills in your notebook.
- 3). Use your calculator to subtract the figure that represents your recurring monthly bills from the figure that represents your total monthly take-home pay. Record the difference in your notebook. The majority of this money should be deposited into a savings or checking account. A smaller portion of your money (decide on an amount of cash that works in your personal situation) should be placed into a separate emergency fund. The best way to accomplish this is to open a savings account. You should make regular monthly payments (like you would with a car loan) to this savings account. By opening a separate bank account, and regularly contributing to it, you will greatly improve your chances of successfully building your emergency fund.
- 4). Make a list of common, nonrecurring weekly/monthly expenses that you incur such as restaurant dining, movies, clothes, vacations, etc.
- 5). Purchase nonrecurring weekly/monthly expense items only with cash or through a debit card that is tied to your bank account. Refrain, whenever possible, from purchasing nonrecurring expenses with credit cards or access checks that are tied to your credit card accounts.
- 6). Study your monthly expenses. You will need to determine if you are living within your means or if you are spending too much of your hard earned money on items that are not necessary. The entire purpose of creating a budget, and placing it on paper, is to bring your earning and spending habits into focus. If you are spending more money than you earn, you will have to cut back on some of your spending habits or figure out a way to boost the level of your income.
Review your monthly budget on a regular basis.
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