Since you are here, you probably discovered that you need to start tracking your expenses, and learn to spend less, and save more. That’s great! Creating a personal budget is an important first step to building sound money management skills.

What is a Budget?
A budget is a plan for managing your money. It is an estimate of income and expenses over a period of time. With a personal budget, you can get a better idea of where you spend your money, to whom you owe money, and how much.

Tracking your Expenses
The first step to create a budget is to determine how much money you spend, and to whom you are paying that money. To do this, you will need to track your expenses, or spending, for at least a month, and the longer the better. We suggest that you track your spending for three months or more to get an even better estimate of your spending habits.

Expenses
Expenses are anything you spend your money on. To track your expenses, you will need to write down every dollar you spend. Follow this link for some budget worksheets to print that you may use for tracking your spending.

Keep your receipts, and write on your budget tracking worksheet all your expenses. Don’t forget to also track all purchases made with cash, including small items. These will be more difficult to track (if you don’t get a receipt), but try to write down as much as you can with a paper and pencil. You may want to keep a little notebook with you to write down expenses as they occur.

Also, at the end of the week, you should try to estimate any payments with cash that you made, that you did not write down that week. If you are not good at tracking your cash expenses, at least keep track of how much cash you put in your wallet, so you know how much you are spending. Then add that amount to your budget tracking worksheet.

Types of Expenses
As you start to track your expenses, it is helpful to break your spending into different categories. There are two main categories of expenses: essential and non-essential expenses. Essential expenses are expenses that are required for living. Non-essential expenses are the extra things you spend your money on. In addition, essential expenses may be broken down into fixed expenses and variable expenses.

Essential Expenses – Fixed and Variable

Fixed Expenses
Fixed expenses are expenses that are the same each month. Examples include rent or mortgage, car payments, car insurance, property taxes, home insurance, and school loans.

Variable Expenses
Variable expenses are expenses that vary each month. Examples include car maintenance, gasoline, food, electricity, heating gas, phone, etc.

Non-Essential Expenses
Non-essential expenses include most of the things we don’t need, and most often includes many items where we waste money the most. It includes spending on clothing, books, movies, magazines, video games, dining out, gifts, snacks, candy, shoes, etc.

While clothing may be considered an essential expense, how much of it that we buy do we really need? If you want, create two separate categories for non-essential expenses. Place some of your clothing money into essential expenses, and the remainder into non-essential expenses.

Again, track your expenses for at least one month. This will give you insight into where your money is going, and also help you determine where you might be able to spend less and save more. By tracking your expenses, you will be able to better plan for your future needs.

After tracking your expenses, you will be able to set up an estimate of your budget, based on the expenses information you have been tracking.

Teaching Lessons:
Budget Lessons – Use these lessons to teach basic budget concepts. For teaching and learning household budgeting.