How do I Begin a Budget

Once you understand that a budget is unique to you, you need to know how to begin your budget.

The first step is to set both short-term and long-term goals. Short-term goals are usually what you want to accomplish or have completed within one year, while long-term goals are more often those things to be achieved beyond one year in the future.

Setting goals for yourself and your family creates greater opportunities for having what you want, and creates an environment where you know where you want to go and what you want to achieve.

In considering a budget method, here are some general rules of thumb that you can use to evaluate which method will work best for you.

1. Your budget should allow you to define your goals first. These goals can then act as a guide to your success. As you compare and evaluate budget methods, be cautious of budgets that only provide feedback about money you have already spent. This is reactive, not proactive. You need to ensure that your budgeting system gives you the power to plan ahead and control your spending, rather than having your spending control you.

2. Your budget should be reasonably easy to complete. If the budget process becomes too complicated for you, you will give up and proceed with no system at all.

3. Your budget should be customized to your unique situation. As everyone’s situation is different, your budget should be a mirror of your needs, goals, and dreams.

4. Your budget should be a communication tool for input and review by others involved in and/or affected by the budget. The budget you select should enhance the communication process with others.

5. Your budget should assist in organizing your financial matters, so that you can make clear choices based on reliable data.

6. Your budget should provide easy tracking of how much discretionary money you have left to spend. This information gives you the power to take advantage of opportunities that may arise.

Selecting and creating a budget method will require making a conscious decision about incorporating change in your life. When you make a life change, especially something that you have avoided in the past, you need to develop a new habit so the change will last.

To develop a habit that will become a constant part of your life, such as budgeting, you need to start small. Take small, but frequent steps to allow for comfortable repetition. You then push forward to bigger steps, while praising yourself for the last ones. This will create a foundation that you can rely on for a long time to come.

The next step in creating a budget that works for you is identifying your financial and personal goals.  You’ll need to create a worksheet similar to the one below:

Applicable Goal?	ST or LT?	Order of Priority	Goals
			Save for retirement
			Set up a reserve/emergency fund
			Buy a new home (primary/vacation)
			Buy a new car/boat/furniture/other personal property
			Reduce/eliminate debt
			Help support elderly parent(s)
			Start/buy/expand own business
			Start/buy/expand own business
			Invest in real estate (land/rental property)
			Travel
			Contribute to charity
			Create education fund for children
			Other __________

Instructions

1. Put an “X” in column 1 next to those goals that you feel apply to you. Include any not identified in rows marked “Other.”

2. In column 2, identify each marked goal as short-term (ST) or long-term (LT).

3. Rate each goal in order of priority under column 3.

For couples, each spouse/partner should complete a sheet separately. After completing, discuss each other’s goal worksheets and agree upon your common goals. Then complete a new worksheet for you as a couple.