©1997 K.C. Knouse
1. Keep a record of every penny spent for one or two months prior to
developing your budget. This will give you a realistic snap shot of current
spending habits. Refer to these figures when working up your budget.
2. Use NET income (after taxes and other deductions) for
budgeting. Do NOT include anticipated bonuses, raises or income tax
withholding refunds; these may not materialize.
3. Make a comprehensive list of all expenses that you regularly
experience BEFORE you start budgeting for them. That way you won't
conveniently forget any when it comes time to allocate money.
4. Divide quarterly, semi-annual and annual bill payments into monthly
expenses for your budget.
5. Establish budget categories for unpredictable expenses (car repair,
house repair, medical bills, etc.) and budget money for them monthly.
6. Budget fixed expenses FIRST (mortgage payment or rent, car
payments, loan payments, utilities, etc.); this money is already spent.
7. Consider SAVINGS
as a fixed expense!
8. Fund a cushion (miscellaneous) expense category with 10% of your net
income to cover unexpected expenses. This gives your budget flexibility.
9. Fund ALL expense categories BEFORE you begin to reduce
funding in expense categories or cut out expense categories. This will give
you a true picture of your current financial capabilities.
10. Set up simple records to track expenditures against the budget and update
them regularly.