Steps to Creating a Budget
- Identify financial goals and determine what is required to reach them.
- Estimate Income from all sources.
- Estimate all Expenses.
- Compare income and expenses to determine if expected expenses are equal to or less than expected income.
- Identify areas where expenses are too high, sources of additional income and places where expenses can be reduced. Any excess should be applied to categories that bring you closer to your goal. Such as, extra income can go towards paying down accumulated debt or to investments. Remember allocating money to investments is an expense in this exercise but one that generates positive net effects.
- Present each category of income and expenses as a percentage of the total.