Odds are that life is going to continue getting tighter for many of us.  Now is the perfect time to turn over a new leaf and get your finances under control.  The first step to do that… Making a Budget! It can be overwhelming to even know where to start, but it’s really not that tricky.  Let’s lay out exactly how to make a budget and what a budget can look like for you.

Before You Start

The important foundation of making a budget is to figure out your why. The “why” of your budget isn’t necessarily going to be the same as your best friends. For us, at one point our biggest reason for having a budget was to manage our money in order to pay off student loans. Once those were paid off, our focus shifted to managing our money so that we could afford to live on only my husband’s income. What is your goal? What is important to you?

When you have a goal or a “why,” you can refer back to it every time you consider purchasing something outside of your budget and remember the greater reason for having your budget. Every unplanned purchase is going to come out of some place in your budget, and while sometimes that’s fine, it that can help you make better decisions about how you spend your money.

How to Make a Budget

The first official step in making a budget is to make a list of all of your monthly expenses. Then, add big expenses that happen less often but are predictable, like car taxes, insurance payments, or healthcare deductibles.

If you need some more help getting started on this part of budgeting, download Dave Ramsey’s FREE Guide to Budgeting.

Let’s pretend you’re making a budget and your family income is $45,000/year, or about $3,750 after taxes. Using figures averaged across several financial experts, the following percentages are a good place to start when trying to figure out a good amount to set aside in your budget. Of course, we can’t go into all the nuances of each person’s situation—maybe you have a family of 6, so your food costs are higher, but you have health insurance through one spouse’s job, so you don’t have to pay that. Your budget should work for YOU and match YOUR priorities.

• Housing/household purchases: 25%
• Food: 12%
• Utilities: 7%
• Charity: 10%
• Transportation: 10%
• Clothing, entertainment, etc.: 4%
• Medical/health insurance: 7%
• Miscellaneous: 5%
• Savings/debt repayment: 20%

Using those percentages yields the following amounts:

Other categories you may need to include: child care expenses, retirement contributions, kids’ activity fees.

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