A budget is a guide to help you save money. It keeps you on track. How then do you make a budget?

Step1- Determine How Much is Your Income

Your first budgeting step is to assess your resources. Knowing how much income you earn from employment or from any other sources. When budgeting, the net income is considered as the amount of money available to spend in the budget.

Step 2- Know Your Expenses

At this step, you need to determine how much money you spend within a given period. This can be obtained from your financial records. In case you cannot trace the records, then you need to track your expenses by keeping a financial diary.

While doing this, ensure you separate the fixed expenses and variable expenses. Fixed expenses are high priority bills that must be met every month. They include rent payments or mortgage, insurance premium, basic utilities and insurances. Variable expenses are those that keep changing and may be difficult to determine them. However, it is possible to get the right estimate through tracking your spending. Comparing your estimates to how much you actually spend will help you adjust your budgeting amounts for the next month.

Step 3- Set Your Goals

Write a list of what you would like to achieve. The list should consist both long-term and short-term goals. Long-term goals can be things like purchasing an asset and paying for your retirement. Short term goals can be things like enhancing the look of your home and car maintenance.

Step 4- Make a Plan

Once you have determined your income and your goals, you can now lay a plan that matches your finances and your goals.

Step 5- Track Your Budget Progress

Re-evaluate your budget every end month by comparing your income and expenses. Make some adjustments based on the changes in your spending. Remember, a budget does not factor out non-financial consideration which may affect the spending habits in case they happen. So, stay flexible.