Create Spending Categories

Once you have calculated what your monthly income you will need to make a list of your expense categories for each expense. Than you will see how much you actually spend in each category and decide how much you would like or want to spend on each category. Don't forget to factor in some funds for unknown expenses in an unknown expense category, so you have available funds for unexpected expenses should any arise. You should remember to categorize expenses that are necessities or "needs" (mortgage, rent, auto, utilities, groceries, etc.) and expenses that are "wants" (designer cloths, new sneakers or shoes, etc.). Once that you have made a list of your expenses we can start designing your budget spending plan. You should make as actual and close to the possible amounts from the past years numbers. You want to have as tight of a budget as you can and most important a budget you can stick to!

The types of expense categories

It is very important to break down your spending into categories. You will probably have between twenty and thirty different categories of items to be included in your budget. Our budget spending plan already has most of the main categories you will need to use to make your budget. You can also create as many different categories as you need but you should put a limit on your spending in each category. You should have base the amounts for each category on what you spend daily, weekly or monthly now. Start by writing down all your expenses and then break them into categories.

By using the provided budget spending worksheet as the start of your budget spending plan, you will be able to create almost your entire budget spending plan. You will find that the budget spending plan will have sub categories like fixed expenses, variable expenses, discretionary expenses and unknown expenses.

There are fixed expenses that are usually the same each month like mortgage payments, rent payments, automobile loans, student loans, installment loans and insurance payments or all other expenses that will stay the same from month to month.

There are variable expenses like utility bills for example telephone bill, electric bill, cable television and other utility bills. You also have other variable expenses like groceries, clothing, fuel, medical, personal care or other things you can't live without.

Then there are discretionary expenses these are things you like but don't necessarily need for example going out to dinner, coffee drinks, snack foods, carwashes, entertainment or other surprise or other non-essential expenses. You might also want to create a special category with a set amount for these discretionary expenses or whatever you like to do! There's no exact amount to spend on each one, so if you love going to sporting events or concerts or you like to rarely dine out, create your budget accordingly.

It is absolutely essential that the money put aside for these budgeted expenses. You should put the money for these expenses in your payment account and must go to the budget categories as soon you get paid.

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