Building a Budget

We hear it all the time; build a budget. Easy to say and perhaps even easy to do, but keeping a budget is very difficult. Personal finance requires two things, honesty and discipline. Building a personal budget that works, requires the individual to be honest about their spending and remain disciplined at all times. Doing these two things will help lead to personal finance freedom.

Step number one with any budget is to be honest about personal expenses and income. Avoid building a budget that underestimates expenses, specially food and gas. These two areas are often much higher than most people realize. Sit down and figure out exactly how much gas and groceries cost each month.

Make the budget building a group process. All family members must be committed to the process and bring some ideas about spending. This will allow for a true picture of family expenses.

Make sure all income is listed for in the budget. Any extra money that comes in must go into the budget, instead of being used as mad money or for reckless spending. In other words, don't hide money. Like all expenses, make sure all income is accounted for.

Place different copies around the house so everyone can see it. Create a spot were spending and income can listed daily or weekly. This is especially crucial for the first few months, providing real data and allowing for any adjustments to the budget.

Allow the budget 3 months to for either success or failure. Economics is fluid, so getting a real picture requires a large sample. Keep good records and after a three months make any changes to the budget or completely disregard it.