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Many people think of a home budget as constricting; if they budget their money, they won't be able to spend it on what they want. While it is true that a budget controls WHEN you spend money, it doesn't stop you from spending money on what you want.

Creating a home budget is fairly simple. It allows you to reach your financial goals, helps reduce debt, and may keep you from bankrupcy.

* Pen/ pencil and paper -OR-
A spreadsheet program (Excel) and computer -OR-
A financial program (Quicken) and computer
* Copies of as many of your bills for the last year as possible.
* A calculator (or scratch paper to do math on)

1) Divide all your bills up by type. Put all the car bills in one pile, household bills in another, etc.

2) Divide each type of bill into the exact kind. For example, all car bills should be divided into payments, insurance, and repair.

3) Add the totals for each kind of bill. For example, how much did you spend on car payments in the last year?

4) Divide each total by 12. This is how much you should be budgeting for each section for each month.

5) Put it all down on paper. Start each column with the main category (auto), then indent on the next line and put the type of payment (insurance). Your lines should look like:
AUTO- $total
Insurance- $amount
Payments- $amount
Repair- $amount

6) Now add in the discretionary categories-- those payments you don't HAVE to make every month. These would include entertainment, clothing, etc.

7) Now put the total at the bottom. This is how much you can expect to spend each month. Is it more than what you make? See where you can trim costs. Is it less than what you make? Make sure you haven't forgotten any bills, then feel free to add to any categories you think you should have a little more in. Don't forget a savings account, credit card, or personal spending money.

8) Go through and make sure you didn't leave anything out. Check for these categories (as applicable):
* AUTO- fuel, insurance, payment, registration,
* BANK- fees
* ENTERTAINMENT- dining, general, travel (maybe
books, cellular phone, internet, magazines,
* GIFTS- Christmas, birthdays
* HOUSEHOLD- cable, electric, gas, laundry,
rent, telephone, trash, water
* MISCELLANEOUS- clothing, general, other
* SCHOOL- books, tuition

9) The final step is to make up a chart so you can keep track of your spending. You can do it on a spreadsheet like Excel or in a financial tracking program like Quicken, or you can just make one up using graph paper. Put each expense item in a row down the left-hand side. Then make sure there are 33 spaces after this: the first one for the budgeted amount, the next one for each possible day of the month, and the last for a total at the end of the month. It should look something like this:

Auto- Gas $70 * * $15 * * * $15
Auto- Insure $110 * $200 * * * * $200

10) Now, just keep track every month. If you run out of money in a category, you either must no longer spend money in that category or (if not spending the money isn't an option) you must transfer it from another category to cover the amount. To get rid of debt, just add in a category for the debt amount and be sure to pay it off every month as budgeted.