There are four basic steps you should take when building a new budget, including selecting your budgeting tools, tracking your income & expenses, setting your spending and saving goals, and following your own rules. The most important thing about building a budget is to make sure you set it up to fit your lifestyle.

1. Select Your Budgeting Tool: First, decide what tool you will use to manage your budget.  The tool you choose is not as important as whether or not you will actually use it. Some options are:

   • Purchase budgeting software. You can find many options by doing a simple search in your favorite search engine for "budget software.
   • Build a spreadsheet to track income and expenses.
   • Use good, old fashioned pencil and paper.



2. Track Your Income & Expenses: Understanding how much and what you are spending your money on will help you set your budget goals.

   • Gather your pay stubs and record how much you make each month.
   • Don't forget to include alimony, child support, or other sources of income if you receive them regularly each month.
   • Start saving store receipts and bank records.



3. Set Your Spending and Savings Goals: When setting goals, it's important to make sure they are realistic. If you go out to eat once a week, make sure it's factored into your budget.

   • Based on your expense tracking, develop a few major categories such as mortgage/rent, utilities, groceries, car payments, entertainment, and savings.
   • Next, set a monthly goal (or weekly goal depending on how you are paid) for each category.
   • Add up expenses from each category and subtract your total expense from your total income. If you have more expenses than income, then you may need to recalculate your expense totals.  If you have more income than expenses, add more to your savings category.



4. Follow Your Own Rules: The fourth step -- sticking to the new budget -- is the hardest. Here are some tips to help you maintain your budget all year long.

   • Set aside time each month to review your goals and record expenses.
   • Keep an envelope in your car or purse and add receipts throughout the month to make it easy to record expenses when you get home. If you don't get a receipt, write the amount down on the front of your envelope.
   • Place reminders with your budget goals on your fridge, your calendar, in your cell phone and on your computer to help you remember to stay within budget.
   • After a month or two, re-evaluate your spending and savings goals and re-adjust as needed.
   • Always leave room in your budget for savings, because your savings will help you stay within budget when unexpected expenses like car repairs or medical bills pop up.