How to Create a Personal Budget

Unless you're filthy rich and money isn't an object, one of the most critical steps in keeping personal finances in order is operating from a budget.

A monthly budget helps consumers learn exactly where their money is being spent and better see where money can be saved. The goal is to help ensure they aren't spending more than they're making.  It also is helpful when trying to set aside money for retirement or college tuition or paying off debt.

A first step in creating a personal budget is determining what mandatory expenses are paid each month. Use past financial statements and bills to accurately gauge roughly how much money comes in and goes out each month.

Consumers mapping out a budget should then create two separate columns. One represents all expected monthly revenue, including regular paychecks, insurance reimbursements or any other income.

The second column is for anticipated expenses, and includes everything from mortgage and car payments to groceries and dry cleaning.

In the expenses column, consumers are encouraged to note which items are necessary and stay relatively the same each month, such as mortgages and rent, car payments, insurance and utilities, and which can fluctuate each month, such as groceries, entertainment and eating out.

The two columns should be totaled separately, with the goal of the income column being more than the expenses column. If the opposite is true, it is critical to determine where cuts can be made. Consumers are advised to look first at the variable expenses, like dining out, since they aren't necessarily essential.

Consumers should review the budget each month to see where they might be overspending or underspending, so changes can be made if necessary.

Chad Brooks is a Chicago-based freelance business and technology writer who has worked in public relations and spent 10 years as a newspaper reporter. You can reach him at chadgbrooks@gmail.com or follow him on Twitter @cbrooks76.