5 Steps to an Air-Tight Budget

If you aim for nothing you'll hit it. Creating a plan and outlining your financial goals is crucial to tracking and sticking to a budget. Without one, you have no way of establishing and regulating funds. You have no way to track any financial objectives you've set, nor do you have the ability to see when you'll be able to meet said objectives. The basic idea behind creating a budget is to put aside fixed amounts of money for both expected and unexpected results.

When creating a budget, there is an order in which one must go about establishing finances. When you've sat down to plan out your week, month, year, or whatever, I have found the following steps to be most efficient:

1. Establish Your Income
The first thing to do is figure out how much money you bring home after taxes. That means whatever number is on your check and actually ends up in your bank account is how much you have to spend. It's better to establish this based on how often you're paid. If you're paid once a month, you should write your monthly salary, but if you're paid bi-weekly you should write what you take home bi-weekly.

If you're paid bi-weekly and you're planning for the entire month, write down how much you make bi-weekly. Then, in another set space, take your biweekly check and multiply it by 2.16 to adjust for the entire month.

2. Define Fixed Expenses
Your first deductions of your income should be your fixed expenses. This means things like car payments, mortgage payments, insurance, groceries, and etc. Include anything you pay regularly, even if it's bi-monthly. Don't forget to include things that are paid once every 6 months or once a year.

3. Set Aside Money For Rainy Days
An effective plan for accidents is to have 6 months of income set aside in case you lose your job. However, in this economy it's not always realistic to have half a years worth of money sitting in the bank. Still, every month you should give an estimation as to something that may go wrong. Have your breaks been acting up? Is that chip in your windshield looking better? Have you had any tootheaches lately? Better safe than sorry.

4. Give Yourself Some Spending Money!
Never forget to give yourself some money to play with. Even if it's as small as 5% of your pay check, that extra $20 could go to eating out one night, or catching a movie with some friends. Everyone deserves a bit of fun every now and then, and it's still important to track that money is being spent -- even if it's not on necessities.

5. Write Down Your Savings
Now take what you have leftover and write down how much you'd like to save. If you have $512 leftover, you might as well just put the $500 away and put the $12 towards paying of debt or doing something fun. Same goes if you have $78 or $13. Take away an increment and put the rest towards something else. It will make budgeting that much easier.