Have you ever wondered where your money goes at the end of the month? Why are you having a difficult time affording something you need? That probably concerns the lack of budget creation and maintenance. Budgeting your money is tedious but necessary when saving for retirement or a big purchase. The following explains some of the benefits of budgeting your money:

  • Stay on top of your monthly expenses
  • Keep track of income and expenses
  • Prepare unexpected expense
  • Avoid overspending
  • Calculate how you need to save for a big purchase
  • Directs priorities
  • Creates positive habits
  • Reduces stress


The five components of a budget

When you begin your budgeting journey, five components serve as a basis for creating your budget. The five components below serve as a foundation for your budget and can be adjusted to fit your needs.

  • Income after taxes
  • Fixed monthly expenses
    • Bills
    • Subscriptions
    • Rent
    • Mortgage
  • Variable expenses
    • Gas
    • Groceries
    • Dining out
  • Occasional expenses
    • Vacations
    • Purchasing clothes
    • Buying gifts
  • Saving & Investing


Another piece of advice I can offer is to write down everything you buy over the next month. For example, when you buy a pack of gum at the store or pay your electric bill, you will be surprised where your hard-earned money is going every month. Therefore, you will be able to budget and reduce the amount you spend on that category.


Choose a budgeting system.

Once you have set goals, categorized your budget, and calculated your expenses, you can choose a budgeting system that will work for you. There are several types of budgeting systems out there. Below is a list of some of the budgeting systems you can use:

  • Notebook and Pen
  • Spreadsheet
  • Free online software
    • com
  • Paid online software
    • Quicken


Although I used 3 out of 4 on the list, I still use them today, and there is no need for me to use Quicken because I created great budgeting strategies with the first three on the list. For example, my budgeting career started with a piece of copy paper and pen. I began to write down everything I was spending my money on for the month. After collecting my data, I began to analyze where my money was going, and after reducing costs, I could save for what I needed.


Once I bought my first computer, I began to transition my paper budget into a spreadsheet and Mint.com. I have used Mint.com for several years because you can categorize where your money should go. Also, you will receive notifications when you pass the limit you set or when you spend below your means.



Setting budgets requires commitment and lifestyle changes that mean fewer trips, dining out, weekend shopping sprees with friends, or going out to expensive places.