Setting a budget is the process of regaining control over your finances. Think of your finances as a vehicle---creating a budget puts you at the wheel. If you've been delaying setting a budget simply because you don't know the process, you may be pleased to learn that it's not very difficult at all.
Choose Budgeting Program
The first step of the budget setting process is to choose a financial software program. One of the most common programs is standard spreadsheet software. With a spreadsheet, you can list each element of your budget in convenient individual cells (where columns and rows meet in a table). Some spreadsheet programs also offer budget templates. You can also purchase budgeting software that allows you to input data into your budget for display in a convenient format. You can also receive reminders about your progress when you use budgeting software programs like Intuit Quicken and Microsoft Money.
Compile and Analyze Expenses
The next step in the process of setting a budget is to pull together all of your bills and start listing your expenses. An expense is any obligation that you pay on a monthly or regular basis in your life, including utility bills, debts and insurance payments. Once you list all of your expenses in your budgeting program, you must then go through each item on the list to determine what's absolutely necessary, what is somewhat necessary and what is not needed.
Identify Income Sources
Once you've analysed your expenses, you must then identify all of your sources of income. That includes income from wages, business activities, interest, gifts and other regular sources of cash that come in each month. For a budget, focus on your take-home or net pay instead of your gross wages. The take-home pay is what you have available to pay your outstanding bills and expenses.
Set Budget Goals
The final and possibly most important step of the budget setting process is to identify and list your financial goals. One of the main purposes of creating a budget is so that you can start achieving your life goals related to money, such as saving, investing and paying for the things you need. You can take additional funds from your budget and dedicate it to your goals.