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How To Make a Budget


List of expenses with calculator
© Peter Dazeley / Photographer's Choice / Getty

Making a budget is the first step to paying off your debt. You won't be able to get out of debt and stay out if you're not good at managing your money. Without an accurate picture of what's coming into and going out of your wallet, you can easily rely on credit cards and loans to eat and pay your bills. No matter where your debt stands, make a budget today. If you already have one, now's a good time to update it.

Difficulty: Average

Time Required: 1 hour

Here's How:

  1. Download and print a Budget Worksheet. You can use this worksheet to complete all the steps below. You'll need a PDF reader like Adobe Reader to view the file.
  2. List your income. Add up all reliable sources of income - wages from a job, alimony, child support, etc. Notice I say reliable. If you sometimes get cash from outside jobs or hobbies, but it's not on a regular basis, don't put this down as income on your budget. Your budget should be a document you can depend on.

    If you're self-employed or have a fluctuating income, use an average monthly income or the income you expect to receive that month.

  3. Total your expenses. Some of your expenses will be fixed every month - mortgage/rent, property taxes, child support, alimony - while others may vary - electricity, water, groceries.

    For your variable expenses, write the maximum amount you plan to spend in that category. For example, you might plan to spend $200 on groceries and $150 on gas. If you spend less, that's more money you can put toward paying off your debt.
  4. Calculate your net income. Your net income is what you have left over after all the bills are paid. You want this to be a positive number so you can put it toward your debt.
  5. Adjust your expenses. If your net income is negative, then you've budgeted to spend more than your income. Variable expenses are typically the first places you can adjust spending, e.g. groceries, eating out, hobbies, gas. Even some of your fixed expenses can be adjusted, e.g. reduce your cable or phone bill, cancel the gym membership, don't take a vacation this year. Evaluate your spending using a "wants vs. needs" analysis. Reduce or eliminate spending in those "want" areas to make more room for the things you "need" to spend money on.
  6. Track your spending. Throughout the month, track your actual spending against what you budgeted. If you go over budget, this will help you figure out where you spent more money. In the future, you can take greater care not to overspend in that area.


  1. Use bank and billing statements to help you confirm your income and expenses.
  2. Divide yearly expenses by 12 and semi-annual expenses by 6 to come up with the monthly amount to spend in those categories.
  3. For now, put the minimum payment of your debts. Once you've completed your budget, you'll put any extra money toward paying off your debts.
  4. Don't itemize property taxes or mortgage insurance if they're included in your mortgage payment.

What You Need:

  • Budget Worksheet
  • Pen or Pencil
  • Calculator
  • Financial and Billing Statements

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