How to make a budget 2

Now that you have calculated your income (See Budgeting step 1 ), the next step in how to make a budget is to calculate your expenses, which can be done using our budget worksheet, via money management software, like quicken or other similar software, or just with a pen and paper. Whatever way you choose to do it you’ll need to track all your expenses and categorize them.

Categories can include:

Housing, Transport, Communication, Utilities, Food, Savings, Household, Health, Insurance, Education, Leisure, Entertainment, Miscellaneous and Annual.

To start out:

Make a note of all your expenses from the last 3 months.
- go through your credit card statements and bank statements
- include all cash transactions. If you don't remember, make a note over the next few months
- include expenses that were unusual
- add in annual expenses

Add these together, and you should have a picture of what you are spending.
Now compare this to what you are earning, is there a discrepancy? If there is a surplus then you need to think about investingIf there is a deficit now is the time to assess why and see where you can cut back.

Whether you are coming up short, have money left over, or are spot on, there will be ways that you can make your household budget more efficient. List the areas where you think you could reduce spending. See our "7 Tips" money saving idea pages.

Next: How to make a budget Step 3