Steps in creating a budget

1. Determine your income

2. Determine your expenses (this may mean keeping up with everything spent for a couple of months to know exactly where everything is going)

3. compare your monthly expenses to your income

4. Decide what is a necessity and what is not- example on my list my necessities are house, car, utilities (lights, water etc), food, insurance, savings, clothes (does not have to be the name brand expensive stuff)

a necessity is what you have to have to survive not what makes life easier

5. Take the rest of the expenses and decide what is most important for your family my list- house phone(for emergencies), internet (for my schooling), cell (I have to be reachable if out for boyfriends health reasons)

6. While the above is needed they are areas which can be cut if needed- example basic service on house phone, internet-slowest speeds to fit my needs (example dial up school site would time out before it loaded the page, dsl- house is on edge of service sometimes would work sometimes would not affected grades because things were turned in late, cable- slowest cable available in area, this is what we have) cell- lowest possible package for use only extra feature is text messaging because simplifies x hubby getting involved in conversations with my older children

7. Now take the items left you have decided you dont necessarily need and see what you have the money for (example cable tv- if you can afford great extra channels is not needed in my household, I do have the package with noggin etc for my daughter because I can afford it. times get tough the package is lowered she can watch the movies we have)

8. Refigure totals to see how budget is looking if I still need to cut and have gone through everything on my list in items 7,6 and 5 and cannot lower any lower I then look to my necessity list to see what can be lowered (for instance can I get my car insurance cheaper, can I cut back on the amount of money I have been spending for clothes, can i lower payments in anyway on the car I drive if not would it be cheaper to get rid of that car and get a cheaper one, how can i cut back on groceries (coupons etc), how can i save on utilities, can i get my house insurance cheaper (this is a yearly decision since we pay our insurance on the house by the year) and if all else fails and I still can’t meet my expenses I have to find a source of more income or move to a cheaper house.

What items go into which list may differ from family to family according to situations. The key to being able to prioritize is to realize what is a necessity and what is not. If you don’t need it to live it’s not a necessity.

Bills that are currently owed such as creditcards, medical bills etc are a higher priority then having cable on the tv. Getting out of debt is not as easy as some make it sound out to be but working out a budget is taking the first step to being able to save money to pay off the bills faster.