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As we talked about in a previous post, the best way to get ahead of your finances is to create a Financial Blueprint.

Your spending is a very important part of this picture.  A lot of people don’t realize what they are spending their money on and how they are spending because they don’t track it.  That’s where budgeting comes in.  If you followed the last post, I told you that you needed to monitor your spending for about a month and see exactly what you were spending your money on.  Outside of the mortgage, rent and utilities, you probably also found that you spend your money on things such as groceries, entertainment, pet care, prescription drugs, vacation, toiletries, doctor/dentist co-pays, and gas.  You probably have other things that I didn’t mention here.  Whatever you are spending your money on, it should all be listed as part of your spending as well.  Let me say that again.

Basically, anything you spend your money on, you should write this down because you need this for the success of your Financial Blueprint.

Phew…. not let’s get started creating your budget.  Pull up a chair.  Get pin, paper, the list you created and your computer.  Let’s continue mapping out your financial blueprint.

Now’s let’s create your budget.  As I said earlier, by now you should already have a list of your expenses.  You also need to document your income.  How much income are your bringing home?  If you are married, how much income is your spouse bringing home?  Is there any additional income such as one or both of you are working a second job?  Some people like to include child support as income.  You can do that as well if you like.  Typically, I don’t include this unless absolutely necessary.  I believe that child support should be used expressly for the child and not be included in the household.  The only way I would include that is if I was facing homelessness.  That’s just my personal preference.  That way, I always have the money I need for my child and don’t have to worry about saying I can’t get this for my child because I lumped the money in with household stuff.  It’s worked pretty well for me and I’ve never had to ask my ex for anything additional.

So, your personal budget might look something like the budget above.  You’ve got all of your income listed on one side and then all of your expenses listed on the other side (or however you choose to arrange it).  I total up both sides and then subtract my total expenses from my total income which will give me a balance meaning money I have left over.  You will notice above that savings is taken into account.  You should always put a little money aside if at all possible.

Think about your financial blueprint and where you are trying to go and then determine based on your financial picture right now how much to save.

That may be 1%, 5%, 10%, etc. of your income.  It’s up to you.  As you get better control of your expenses and start eliminating some of your debt, you can certainly change that amount.  One rule of thumb, that I always go by is ALWAYS, ALWAYS, ALWAYS, PAY YOURSELF FIRST.

Well, that’s it for budgeting.  We will move on to debt elimination, savings and investing in future posts.  Oh, by the way you will want to stick as closely as you can to your budget.  That’s not to say things don’t change, but if you want to achieve what you have outlined in your Financial Blueprint… stay the course.