4 Steps to Create the Perfect Budget

​No matter whether you’re a millionaire or living paycheck to paycheck, the best way to gain control over your finances is to create a budget to clear your debt hurdles. Unfortunately, when most people think of budgets, they usually picture money restriction, but budgeting allows you to focus your dollars, so you can cover every expense.

The good news is a budget is easy to set up and maintain, even if you’re not good with numbers. All it takes is a few key pieces of information and a little time.

Gather Your Income

Your income is the easiest piece of information to add to your budget because it’s straight-forward. When gathering your income, include every source that brings money into your household. 

You’ll create a budget for the entire month, so add up all your income no matter when that money hits your bank account, and plug it into a spreadsheet.

Write Down Your Expenses

The meat of your budget lies in your expenses; to create a comprehensive one, you need to include every expense that requires your money. Make a line item and include the monthly dollar amount you pay for it. If you don’t have an exact amount, an educated estimate will do.

Here are some expenses you might have in your budget:

• Mortgage or rent
• Telephone
• Electric
• Food
• Gas
• Television
• Car payment
• Insurance
• Credit cards

Some of these expenses have fixed monthly dollar amounts, and some are flexible. For instance, you can lower your grocery bill with coupons or your telephone bill by changing your plan, but your mortgage is always the same.

One flexible expense you have control over is your credit card payment, especially if you have more than one. You already know once you run up credit card debt, it’s hard to get rid of, and that’s straining on your budget. But there are companies like Braidwood Capital​ who can help you consolidate your credit card debt with one loan and lower your interest rate.

Once you focus on the expenses that you can eliminate or change, the more income you free up for other things.

Don’t Forget the Sometimes Bills

How many times has a holiday snuck up to surprise you, and you haven’t saved a dime for it? What about when your car needs a new battery, and you have to charge it because you have no emergency savings? Instead of getting caught with a surprise expense, make these events line items in your budget.

For example, estimate how much you spend on gifts in a typical year and divide that number by 12. Then, make a line item for gifts in your budget using your monthly estimate. That way, when a birthday or holiday comes around, you have money earmarked for that expense.

Doing this for each anticipated expense, no matter how infrequent, prepares you ahead of time, and lessens the chance of increasing your credit card debt.

Bring the Bottom Line to Zero

The goal of your budget is for your bottom line to equal zero dollars. In other words, your income should match your expenses exactly. If you have any leftover income, add a line item for savings and transfer that money over to a separate account in another bank for safekeeping.

If the difference between your income and your expenses is a negative number, you have two choices: increase your income or decrease your expenses. Start by trying to lower your expenses to see if you can balance your budget that way. If you can’t, you’ll either have to eliminate some luxury items or increase your income streams.

​Working Budgets Bring Freedom

​It might sound restrictive to account for every dollar that enters your home, but the opposite is true. Whether or not you track your dollars with a budget, you're using your money somewhere. 

It’s better to control where that money goes, so you can redirect it to more important areas in your life.