Making a monthly home budget to keep track of your spending habits can be a little daunting. Creating a budget takes time, so set aside at least a few hours.
Start with a clear goal.
Using paper and pen can be just as precise as using an electronic program, but financial software does make the job easier, and it also reduces the amount of human errors.
Electronic software like Mint (www.mint.com This is the program that I use) which is free and probably the easiest solution. The beauty of electronic software is that it creates running totals, makes suggestions, and shows how debits and credits affect each other.
Everything that shows incoming and outgoing money, such as earnings statements, receipts, bills and bank statements, has a place at the budget table. U.S. News and World Report suggests separating these two categories for incoming and outgoing income.
You'll need a total for both categories. This is where many budgeters get a bit nervous, but don't be. The incoming amount might be smaller than the outgoing, but a budget will help you control that.
The outgoing category needs more attention after you've got a grand total. The next step is breaking debits into subcategories such as utilities, mortgage, credit cards and discretionary spending.
Discretionary spending adds up fast. A few dollars here for movie tickets and a few more there for dining out sometimes total more than a fixed bill that you pay every month. This is the subcategory where you can create the most change.
With the numbers in black and white, you can approach the monthly budget more realistically. Discretionary spending might be the only category where you can find and divert money toward debt reduction and savings without any major lifestyle changes such as changing your address or the car you drive.
A tried and true way to manage discretionary spending is the envelope method. The money you allocate for everyday expenses goes into an envelope each month -- that's right, cash. Expert money managers say that with cash in hand, you're more aware and less likely to overspend.
Now that you have a plan in place you can better find ways to control where your money goes every month.