Who Needs a Budget? Spoiler Alert – Everyone

I don’t need a budget. I’ve got income, and I pay my bills. I’ve heard this dozens of times – even from my own husband. But having income and paying the bills isn’t enough to protect you and your finances from a disaster. Creating and following a budget can help you reduce your debt, increase savings, and relieve the stress of wondering how you’d pay for any unexpected expenses, like a sudden illness or accident.

I know, budgeting has a boring reputation. But it doesn’t have to be tedious or difficult if you go into it with the right attitude. Rather than think of it as a chore or something you have to do, turn it into a personal challenge, a game, even a competition among household members. Remember, your budget is your own – a working document that you’ve created. It’s ok to change it as you go along. Just going through the process of creating a budget will increase awareness of your spending habits and help you save more.

Before you begin, be sure everyone in your household understands the budget goal and is willing to play along. Set a goal together of saving X amount of money or reducing spending or debt by 5%. You may want to set a monthly goal and a yearly goal, just to keep you motivated. Next, there are four basic steps to creating a budget: track your current expenses, determine your total monthly income, create a list of spending categories, and project your monthly expenses for each category. (See below for a list of links with specific directions for creating your budget worksheets.)

Once you’ve created the budget, if your expenses are greater than your income, you’ll need to look for areas where you can cut back on spending. Don’t cut out everything that makes life fun! Make a list of the things you cannot live without and then try to reduce your expenses in other categories. If you typically spend $300 on dining out each month, reduce it to $100 and put the $200 savings into another budget category. If you have credit-card debt, pay down the ones with highest interest rates first. Massage the budget categories until your income is equal to or greater than your expenses.

Once your budget is done, challenge yourself and everyone in the household to meet your budget goals. Don’t beat yourself up if you go over a bit in one category, but do keep the budget as a guide. Make adjustments as needed, always with the savings goal in mind. When you meet your goal, celebrate! Then keep up the good work. Before you know it you will be out of debt, have plenty of savings and will feel like singing and dancing all the way to the bank.

NOLO: How to Make a Budget

Personal Finance at Duke

Household Budget Worksheet from Google Docs

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