Household-Budget-planOnly a small percentage of high school and college students ever learn how to budget while in school.  Even fewer are taught how to budget by their parents.  As a result, many American young adults find themselves falling into debt when they enter the working world and begin living on their own.  When young adults can’t get a handle on controlling their finances, they carry over bad spending habits into marriage and family life.

Lack of knowledge about how to create a budget plan can lead to overspending, under-planning and a total ignorance about what it costs to live from day to day in today’s world.  Simply learning how to estimate one’s cost of living and draw up a physical budget plan can prevent the kind of spiraling debt that can devastate an individual, his family and the economy, not to mention ruin one’s credit rating.

This step-by-step guide will help you to create your very own, customized budget plan.

1) Start by locating a budget worksheet.  These are available all over the Internet for free.  They typically consist of a sheet with multiple rows and columns for listing your income and itemizing your living expenses and your debts and monthly debt payments (student loan payments, car payments, mortgage payments, etc.).  Some easy-to-use, practical budgeting worksheets can be found here:

* Microsoft free Personal Budget Worksheet (office.microsoft.com/en-ca/templates/personal-budget-worksheet-TC006206279.aspx)

* Free Financial Advice Budget Spreadsheet (docs.google.com/spreadsheet/ccc?pli=1&key=0Alp6tsapXR6bdEJKSC1wSWpDZmFwZGlwYU85RTBrVXc#gid=0)

* Money Gazette Budget Template (docs.google.com/spreadsheet/ccc?key=0Alp6tsapXR6bdFU1Z3N3Q0x0ZjBTbHI4UFhidUJWQ1E#gid=5)

* The Monthly Budget Planner (docs.google.com/spreadsheet/ccc?key=0Alp6tsapXR6bdDI5S01LVmgwZWs4a2pmeWIzMk1PN1E#gid=0)

* The Family Budget Planner (docs.google.com/spreadsheet/ccc?key=0Alp6tsapXR6bdEZmN0ktdTNvUGFTMzJpSjVRZjEzQ0E#gid=0)

You can also create your own blank budget worksheet if you have a software program like MS Excel.  Some individuals prefer this because they can customize their worksheets to suit their needs exactly.

You can choose to do your budgeting on your computer, or you can print out your worksheet and write things in by hand.  (Some people find this more effective, especially when they first start to use a budget plan,  because they don’t have to fire up their computers to check their budgets or to fill in information).

2) Fill out your worksheet.  You’ll need to list all of your day-to-day expenses as well as your monthly bills.  Different worksheets list these things differently.  Follow the directions given with your chosen worksheet.

You will probably have to really think about some things, like how much you typically spend on groceries each week.  Do your best to estimate this figure, and try not to underestimate.

You will also have to fill in your monthly income.  If your income fluctuates, you may have to estimate and average this out over the course of a year.  Again, follow the directions provided with your budget plan worksheet.

3) Take some time to evaluate.  Now that you’ve filled out your worksheet, evaluate your expenses versus your income.  Does anything surprise you?  Are you spending more on anything, like groceries, gas for your car or your daily coffee stop, than you thought you were?  Were you really aware of how much of your money is going toward debts like student loan and car payments?

If you find yourself looking at a worksheet that indicates that your monthly expenses are greater than your monthly income, don’t get discouraged.  It’s possible that you’re missing some information, that you’ve overestimated your monthly spending, or that you are actually bringing home more money than you guessed.

4) Do your best to make realistic adjustments to your budget.  Now it’s time to allocate your spending.  If you see that you’re income isn’t enough to cover your expenses, you need to start looking at areas where you can spend less.

Obviously you can’t lower your monthly debt repayments, but you can cut your spending in other areas.  Grocery spending is the easiest one to slash, at least on paper.  (It’s a little bit harder when you’re actually at the grocery store and your faced with high-priced products.  This is where discipline comes in.)

If you find you need to cut back, here are some suggestions of ways to do that:

* Cut back on the junk food that you purchase.

* Buy generic instead of brand-name products.

* Bring your own lunch to work instead of eating out.

* Cut back on the number of coffees you buy during the week.

* Drive less; walk or bicycle more often.  Or, take public transit to work/school.

* Cook from scratch more often.  Avoid pre-packaged meals.

* Make your own household cleaning products.  You’ll find lots of effective and economical recipes online.

* Hand laundry outside to dry instead of using your dryer.

Once you’ve tweaked and adjusted, it’s time to put your new budget plan into action.  Try it out for a couple of months.  And remember, no one is grading you on this, so if you discover that you have to make a few more adjustments as you go along, that’s okay.  You’re in complete control of your own spending, and this is simply a tool to help you do that.  So make it work for you!