How to make a budget

A budget is a plan to help you live within your means. If you regularly find it necessary to use money from your savings to pay monthly expenses, or are unable to pay all your credit card charges at the end of the month, you need a budget. Perhaps discussions about financial matters end up in fights with your spouse, or you find yourself hiding certain purchases because you're embarrassed about how much they cost - you need a budget.

How to make a budget:

• Write down your income. Include the money that you bring home each month. Include interest and dividends, bonuses, tax refunds, child support, etc.

• Write down your expenses. Refer to your bills or checkbooks to get accurate information. Include such sundry expenses as the coffee purchase on the way to work and the cost of using a copier machine. Be sure to divide annual expenses (insurance, taxes, summer camp) by 12 and include them. Include all utilities, insurance, groceries, clothing, car payments, medical costs, loans, savings, investments, tithes, gifts, entertainment, and vacations.

• Subtract your expenses from your income.

  • If you're in the black - good for you. You may still want to re-evaluate your spending patterns and reallocate your income to other areas of investments or charitable giving. You can also reduce your expenses by more careful spending.

  • If you're in the red - you will need to make some cuts in your spending. Divide your expenses between "Necessity" and "Want." Then go through your "Necessity" list, item by item, to see if there is a cheaper way to obtain the same thing. Look at your "Want" list and see if any of these can be postponed, cut out, or replaced with something cheaper.

• If you are married, include your spouse in all conversations. The success of a budget will depend on the entire family adhering to the spending plan. Individual differences in spending habits and money management probably will rear their ugly heads. You must negotiate your differences. Vow to each other and to yourself that you will follow through on the cuts you've decided upon. Discuss the need to keep your spending in control and the concept of living within your means.

• Mark your progress. At the end of each month prepare a financial statement of your spending. Make course corrections immediately so that your budget will balance by the end of the year. Be willing to re-evaluate priorities and re-establish what is essential and what is a luxury.

From At-Home Motherhood: Making It Work for You by Cindy Tolliver. Copyright (c) 1994 by Resource Publications, Inc., San Jose, Calif., 888-273-7782. Used by permission.

Cindy Tolliver made a decision to interrupt her high school teaching career in order to stay home and raise her three daughters.