The steps to follow in creating a budget

[pusaka]

Like they have said that he who didn't plan has already planned to fail and this is why we have some businesses springing up but they are not succeeding because of lack of proper guide and management. Budgeting is one of the leading factors to business and it growth.

A business person who knows what he is doing, would take stock of his business from time to time and make plans to growth it. Businesses are not handled into success for the lack of proper budgeting, even the government budget on how to carry out his capital projects and recurrent expenditure. Budget determines how far the business will grow or how soon it will crash also depends on lack of proper budgeting.

Without proper budgeting, all successful businesses are doomed to fail. That is already expected much more to those high rising businesses where extreme budgeting is a must. If you fail on that, the whole concept of business will fail as well. So put budgeting as the topmost priority when aiming for success and long term profits.

However, budgeting can always be learned if you have the eagerness to study on it. Sometimes, it takes losses at first before you will see the high importance of budgeting, and that's normal as long as you also learned your lesson.

Everything will start with planning and one of the things in the planning is the budget. The budget is one that must be carefully thought out and prepared, because it will greatly determine the success or failure of the business that we will run. And don't forget to always budget for reserve funds, because not all businesses run smoothly at the beginning and often require an injection of funds. Not only at the beginning, when it is successful and advanced, sometimes something unexpected can happen.
I remember when Covid came, it came unexpectedly and a lot of businesses were destroyed because of it, if you are not ready with spare money then it is certain that the business we run will not survive. I listened to a friend's story who had to maintain his business and he did everything he could including selling his assets and getting into debt, I was shocked when I heard the amount. From there I can learn that reserve funds are indeed very important in doing business.

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[Bitco55]

Marry Christmas and happy new year.
 It comes to me to share my knowledge with others, but I am sure some might know the steps in creating a budget, but it might be that they are not following it effectively. I hope if I share such knowledge, it will help a lot, especially in the season we are in now. I know that as we have already celebrated Christmas, we have spent much of our savings, which we are still going to spend more on when it comes to the New Year celebration, so I take this as a reason to share such information with others so others will not suffer, especially after all this celebration, so I will list and explain the steps in creating a budget.
 
The steps in the budget include

1. Determine your income: As the first step in creating a budget, you have to know your total income in terms of what you can afford. Do not write a budget that is more than your income and end up not achieving anything at the end because your income determines your budget, so let's take note of our income first. This income might include your weekly,monthly, or even yearly income, as well as side hustles and any other source of income.
 
2. Identify where your money is going: The second step in creating a budget is to track your expenses. This is also very important because, without knowing how you usually spend your money, you will end up writing a budget that you can’t even stick to. More over, expenses include housing, transportation, food, entertainment, gambling, and so on. When you have identified where your money is going, you can categorise it into groups. For instance, clothing, house rent fees, and others should all be in the category of housing. If that is done, you have definitely achieved your second step in creating a budget.
 
3. identify or set an achievable goal: This is the third step in creating a budget when you have identified your income, tracked your expenses, and categorised them. Why I say achievable goal is that you have to set a goal that you can achieve either long-term or short-term. For instance, you might save money in order to pay your debts, invest the money, or even pay for housing and any other expenses, such as buying valuable and usable items that won’t be a liability to you.
 
4. Start creating the budget or priorities for your expenses: This is the next step, for me. This is the step where you will start writing the budget. It is not that you won’t write those other steps I mentioned earlier; you will also write them, but this is the stage where you will allocate some amount of money to the categories that you have created at the second step, and you have to make sure that it aligns with your priorities. After allocating a certain amount of money to those categories, you should make sure that you keep some of it as emergency funds; it is also important.
 
5. Review the budget; in some cases, I mean monitoring, evaluation, or adjustment of the budget. This is like the final stage in creating a budget, although this stage is a continuous process because this stage never comes to an end unless you have purchased all that you have put in your budget to achieve this process, including regular adjustments as needed to accommodate and adjust your budget. This is done in case something comes up, such as the use of the emergency fund that you keep as a category for things like an increase in the price of what you intend to buy for medical expenses, which might be an emergency, and many others. In this step, you must track your budget very carefully and with caution to make sure you have achieved it.
 
The steps I have listed above are the ones I follow whenever I want to write a budget. You can change this step in many ways. For instance, a gambler can use it, but it will be more effective with the amount he needs for the gambling, and he should make sure he follows the track, so stick to the budget to avoid the source of unusual spending.
 

Thanks for sharing this important information. Budgeting is very important. Sometimes, it is even the reason why some countries aren't developed or having a good economy. They have lots and lots of resources, but are wasteful and have little or baseless spending plans. Budgeting is really helpful, both for the rich and broke.

[AicecreaME]

A very good list of advice you got.

Budgeting is very important, especially if you have your own family, to avoid spending it on unnecessary things. What I mean by unnecessary things are those things that we only wanted, which would not benefit anything in your household. It also help for us not to overspend it, and to visualize how much we should spend and how much we could save.

Budgeting should be practice as early as possible, to save money and spend it on things that would benefit us in the long run.

[Peanutswar]

Since when im started to have to earn I always commit the use of the 50-20-30 strategy which is the 50 percent is on the daily needs or sustainability for survival like food, rent, clothes, etc. with the 30 per cent those are the emergency funds you can swap the 20 and 30 budget it depends on you still at the end of the day its a must there's accumulated amount on this particular part, emergency funds is a must because anything can happen with your current situation unexpected resignation, natural occurrence, etc. the rest money is for your wants now if you want to spend for your satisfaction go a head as long as you know how to monitor where is the inflow and outflow of your money you don't need to worry.

[someone703]

Yo, this topic is fire! I couldn't agree more.

Budgeting is so important, especially in these tough economic times. If I didn't have a budget, I'd definitely be in over my head and drowning in debt. Budgeting takes discipline and commitment, but if you stick with it, you'll see the big benefits.

I think everyone should start budgeting today to manage their finances effectively and achieve their financial goals. Let's do this!

[Dunamisx]

Before making a budget plan, try to conduct a feasibility study of the things at hand that should be included on your budget plan in other to have an idea of them first, then try to make a rough estimate and then begin with the recommended procedures from OP, also when making a budget, we must consider the needs from their order of preference and lastly, we shouldn't forget to include the miscellaneous budget for everything under our budget plans.

[itorai]

This is a completely logical approach.

1. Determine your income: As the first step in creating a budget, you have to know your total income in terms of what you can afford. Do not write a budget that is more than your income and end up not achieving anything at the end because your income determines your budget, so let's take note of our income first. This income might include your weekly,monthly, or even yearly income, as well as side hustles and any other source of income.

I think this is the most important factor determining the type and method of creating a budget. On this basis, I would like to delve a little deeper into this point, considering that the size of income versus the size of expenditures can determine the size of the budget that can be created at a given time. This requires a basic condition, which is the presence of surplus income to enter into saving (according to a precise plan) and the size of the budget that can be obtained be clear.
This leads us to consider that the more revenues exceed expenses, the easier it becomes to plan to create a budget. It becomes easier if we adopt what investors call “diversifying sources of income,” because often someone who has one source of income (even if it is fixed) cannot balance it with expenses in order to be able to develop a plan to create a budget.

I agree with your point about determining income, I see that determining income is the key to realistic budget limits. While the comparison between income and expenses I think can play an important role to determine income. However, if we want it to be even better, we have to separate the prioritized expenses and even record them every time there is an expense so that they can be controlled.

[tjtonmoy]

I am not doing it right now, but I used to do a method that I learned from "friends" tv show. Obviously that was in the 90's so it was quite possible, and it was set in the USA so it was even more possible, not really possible here where I live currently with world record breaking inflation rates we just had in the few years, we had %100+ inflation rates, for a few years, and my income didn't go up like that, so this method is for people who live in a bit more stable places. Just put certain % aside every single time you get a paycheck and assume whatever left is your salary. So you get 1000 dollars a month? Put 100 aside and imagine you get paid 900 and then that 100 is not available, it never existed, you never got paid it, its somewhere safe, like a bitcoin investment, or gold, nothing crazy like futures or margin, and you just keep doing that for a few decades and you should be able to retire rich.

Thank you very much for sharing this idea. I have never watched the show so I won't know it. This is a great way to create a budget while you make a saving and that saving grows over time. This also creates a mental state in which whatever budget we come up with, that budget will never include the extra amount that we separate from the actual income.

We can learn to live a life where we can manage our daily expenses in that limited amount of income and save up for the future. Also in case of emergency, we will always have a backup plan ready.
I'm not going to lie, I will try out this method for sure. Starting from the year 2024. This is going to be a great journey if I manage to pull this. Thank you again for sharing.

[Mahanton]

This is a completely logical approach.

1. Determine your income: As the first step in creating a budget, you have to know your total income in terms of what you can afford. Do not write a budget that is more than your income and end up not achieving anything at the end because your income determines your budget, so let's take note of our income first. This income might include your weekly,monthly, or even yearly income, as well as side hustles and any other source of income.

I think this is the most important factor determining the type and method of creating a budget. On this basis, I would like to delve a little deeper into this point, considering that the size of income versus the size of expenditures can determine the size of the budget that can be created at a given time. This requires a basic condition, which is the presence of surplus income to enter into saving (according to a precise plan) and the size of the budget that can be obtained be clear.
This leads us to consider that the more revenues exceed expenses, the easier it becomes to plan to create a budget. It becomes easier if we adopt what investors call “diversifying sources of income,” because often someone who has one source of income (even if it is fixed) cannot balance it with expenses in order to be able to develop a plan to create a budget.

I agree with your point about determining income, I see that determining income is the key to realistic budget limits. While the comparison between income and expenses I think can play an important role to determine income. However, if we want it to be even better, we have to separate the prioritized expenses and even record them every time there is an expense so that they can be controlled.

You would really be needing to determine about your income because if you dont know on how to make out some budget which is really that basing up on what you do earn then you would really be most likely on getting overdropped as you would really be having those kind of spendings on which you are really that going beyond those line. This is where people do usually mess up on the time that they would really be spending up
more which is something that it is really that out of their income range because if you are really just that sensible on doing such stuff then you wont really be that making yourself that able to mess up when it comes to budgeting. It is really just that there are people who are really that too careless when making up some budgets on which some of them wont really be caring about.

People would usually be making out some adjustments on the time that they would really be experiencing some hardship on which this is really that common. For us to survive into these non  stop
economical increases and other stuffs then this is where you would really be putting up importance and relevance in speaking about budgeting and allocation.

[tygeade]

You have forgotten the simplest and most basic thing of creating a budget but it's one of the most important thing and that's to list all of your expenses and where your budget is going. With that, you'll be able to track your expenses and you know where it will be spent. Because if you don't have that list and you're good at the other things, how are you going to track them all? You've listed about #4 as creating and writing the budget but I think that should be at the top together with determining your income/expenses.

The biggest issue is that, if you list, and the list has something you can't get rid of, then you are pretty much screwed. For example, for me the biggest expense is literally my debt, and as long as my debt stays, I am going to have to keep paying that, for example just today I have spent 400$ for an emergency root canal operation, and it was on two teeth as well, so it cost a lot when you want care right away without appointment and it's root canal and it's two tooth, that may look like it's expensive, but when you have a hurt so bad that you understand why people throw themselves off the rocks in BC period when dentists didn't exist, you would be willing to pay 4000 let alone 400.

However, that also means now I have more debt, it's just another expense, I can't cut down on it, it's just expense and have to be paid.

[Egii Nna]

You have forgotten the simplest and most basic thing of creating a budget but it's one of the most important thing and that's to list all of your expenses and where your budget is going. With that, you'll be able to track your expenses and you know where it will be spent. Because if you don't have that list and you're good at the other things, how are you going to track them all? You've listed about #4 as creating and writing the budget but I think that should be at the top together with determining your income/expenses.

What you are trying to explain is what I discussed as #2. If you will be patient and understand my points, you will understand that I am trying to explain effectively all that is possible to learn and understand about creating a budget and the effective steps that you are going to follow to have a simple and accurate budget.

Although I know some authors or articles can give you almost ten (10) or fewer steps you can follow to create a budget, which is not bad, for me, I focus on creating the same steps I do follow in order to achieve things I want in my life. So believe me, the steps I mentioned are exactly what I usually do within my own budget. If you focus on the content under every number inside the topic, you will understand that I have explained all that is required in budgeting so far in the topic.

[franky1]

before starting the OP's 5 steps there is another step
the first step is
tell yourself that things will need to change to live within your means. because obviously if you need to set a budget you have obviously already lived outside of your means. so before even budgeting you need to accept that things need to change
a budget will fail if you think things wont have to change


the final step is to not set such a restrictive budget that life feels unbearably restrictive. the goal is to organise and reduce wasteful spending. but this does not mean stopping all spending at all.
this i the point where you learn what is worthwhile spending

its knowing the difference between a wasted lump of money vs utilised lump of money

EG say you had 2 lumps of $20
1 lump is used to buy a pizza which is a wasteful use of something that is just a 15 minute convenience that becomes a toilet flush the next day
1 lump is used to buy a hour of you/your kids evening activity/class that makes you/them happy all week, something to look forward to next week

im not saying find something frivolous to keep doing. but instead im saying figure out a frugal item thats meaningful to your life that will keep you entertained/inspired each week to keep going. EG if taking your kid on riding lessons makes your kid happy which makes you happy, dont buy then a pony. but instead find a frugal riding class that wont break the budget, and instead is included in the budget as a purposeful spend that will mean alot to the family unity

figure out what is meaningful to your life and what is just wasteful, cut out the wasteful, and be frugal with the meaningful. dont just live like a caveman and go insane

a budget will fail if it feels like you are no longer living any kind of life

[Fuso.hp]

Before spending money we should first make a chart of how much money we are earning every month and how much money we are spending every month. If after making the chart it is seen that more money is being spent than the income every month or the money of own income is not left at the end of the month then we have to understand that our expenses are excessive. Planning is very important to avoid overspending yourself. At the end of the month, we have to calculate how much money we used without need, how much money we used without need and how much money we wasted. Whenever we can find such accounts then we can spend the money in the right way and it will be seen that even if the income is small, some amount of money is left at the end of the month.

[knowngunman]

1. Determine your income: As the first step in creating a budget, you have to know your total income in terms of what you can afford. Do not write a budget that is more than your income and end up not achieving anything at the end because your income determines your budget, so let's take note of our income first. This income might include your weekly,monthly, or even yearly income, as well as side hustles and any other source of income.

Budget is one of the most important part of managing finances but unfortunately a lot of people don't have a formal budget and some people who managed to have one can not stick to it efficiently. It's a great challenge if we can not stick to a budget we use our hands to draft but it's understandable because majority have no stable and fix income.

This number one step, as important as it seems, is the reason why most people fail to stick to their budget. If you don't have regular and stable source of income, it'll be difficult to stick to the budget you draft if you have one because I don't even see reason for drafting a budget when you don't have what to spend.

2. Identify where your money is going: The second step in creating a budget is to track your expenses. This is also very important because, without knowing how you usually spend your money, you will end up writing a budget that you can’t even stick to. More over, expenses include housing, transportation, food, entertainment, gambling, and so on. When you have identified where your money is going, you can categorise it into groups. For instance, clothing, house rent fees, and others should all be in the category of housing. If that is done, you have definitely achieved your second step in creating a budget.

Honestly, setting up a budget is a small thing but along the way, we abandon to stick to it due to some unforseen circumstances. The emergency funds is missing in your list and it's very necessary because it is among the things that make it difficult to stick to budget especially when you allocate a small amount of money to it and it hit you hard in unexpected ways. Vehicle repairs and health issues are good examples of this. It's a good idea to always include an emergency fund category in one's budget with a reasonable amount allocated to it in order to cover that types of expenses whenever it occurs.

Importantly, you need to set goals for your budget and once you have the goal, creating a budget will be easier as long as you can stick to it as designed.

[Adreman23]

Thank you OP for sharing these helpful budgeting tips. They can be particularly beneficial for individuals who tend to spend more than their income, leading to reduced savings or accumulating debts due to a lack of budgeting knowledge. In our technologically advanced era, there are likely mobile apps that can be installed to simplify budget tracking and management. Recognizing the significance of effective budgeting is crucial for building savings for the future and providing a financial cushion for unexpected emergencies or unforeseen expenses. Your insights encourage a positive and proactive approach to financial planning.

[tygeade]

Honestly, setting up a budget is a small thing but along the way, we abandon to stick to it due to some unforseen circumstances. The emergency funds is missing in your list and it's very necessary because it is among the things that make it difficult to stick to budget especially when you allocate a small amount of money to it and it hit you hard in unexpected ways. Vehicle repairs and health issues are good examples of this. It's a good idea to always include an emergency fund category in one's budget with a reasonable amount allocated to it in order to cover that types of expenses whenever it occurs.

Importantly, you need to set goals for your budget and once you have the goal, creating a budget will be easier as long as you can stick to it as designed.

This unforeseen part is the reason why most people have trouble, it is not planned budget expenses that causes people to have trouble, we all have that and it happens and it's fine, we can't always think like that would be the worst case, we can't really see that change all that easily, what we need to do would be making sure that it's going to end up with a trouble later on.

So, if you can't plan for an expense, how can you prevent it, or how can you budget that accordingly? Well, you could try to have a "rainy day" savings along with your regular savings, on months that you get paid and nothing happens, keep putting some aside, and use that for urgent needs, but that's usually not enough. Basically, we just don't make enough to put money aside when something goes wrong.

[Frankolala]

A very informative topic. It is good to set budgets based on your income and adjustment needs to be made to suit your budget and your income. Something I see that can frustrate someone's budget, is the high level of inflation, you might have a budget of $1k in two moths time and you are working towards it.

When it is already two months, you might see that the amount you budgeted will not be enough because of high rate of inflation. This is why when you are making a budget, don't depend on the exact amount but rather make provisions for extra cash, so that incase things get more expensive than what you have budget initially, you can still achieve your goal by taking from the extra that was reserved for that purpose.

[Japinat]

You got it right but the most important and key step from all those points is having priorities. One must set proper priorities on their expenses. Most people fail to create a "budget" plan and remains broke by the end of the month just because of spending money on things they could have "lived" without. They give priorities to "useless" things and then they end up struggling to pay their bills. If paying bills is your priority, pay that first. If paying your debts is your next priority, then do that. "Saving" can also be a priority. After you are done saving, the rest of the money that is left is yours to spend on anything you want. Budgeting is not as complicated as people thing. As long as they keep themselves organized and spends responsibly, they will always be able to follow their budgets.

Saving is not hard unless you make it complicated. Except for those people who don't have source of income, then it's impossible for them to save as they don't have an income to budget in the first place. However, I believe it takes discipline to finally see yourself saving without alibis or excuses. Some may have a lot of money but were unable to save because they can't control their expenses and instead spend like there's no tomorrow that comes. Probably, more like a one day millionaire.

[tabas]

Today, it is not important what people might think of you. Because what all matters now is how you deal with your own life and problem. Identifying it and creating budget for your expenses is a wise thing that everyone does now because of your habit is to spend mindlessly, you will have to deal with the consequences later on. That is why you will hear people telling that you should just spend according to your income abd that is living according to your means and living beyond your means. Living frugally as you follow all of those things mentioned by OP will even make you live better.

[Unbunplease]

Today, it is not important what people might think of you. Because what all matters now is how you deal with your own life and problem. Identifying it and creating budget for your expenses is a wise thing that everyone does now because of your habit is to spend mindlessly, you will have to deal with the consequences later on. That is why you will hear people telling that you should just spend according to your income abd that is living according to your means and living beyond your means. Living frugally as you follow all of those things mentioned by OP will even make you live better.

To properly plan a budget, it is necessary to divide expenses into fixed (payment for an apartment, transportation to work, interest on loans, communication services, etc.), variable (food, clothing, medicine), and optional (entertainment, cigarettes). It is also necessary to exclude purchases based on emotions. In the end, by analyzing your expenses, you can significantly reduce them