Many people have problems with their personal finances simply because they are living beyond their means. They see a few dollars in their checking account and figure it is there for them to spend. However, this is the first step toward living paycheck to paycheck, and financial instability! If you want to improve the state of your finances, pay your bills and start an emergency fund; Creating a budget is the best way to start. Here, you will learn some of the basics of budgeting.

The first thing to do is to purchase a notebook to track your spending. Write down every monthly bill or expenditure you must pay. These items should include: mortgage or rent payment, utilities, groceries, gas, phone and any credit card or loan payments. Add these items together to find your monthly expenses. Don’t leave anything out, even your morning latte!

Next, make a list of all available income. This includes paychecks, bonuses, rental income, alimony, child support and any other income you receive. Subtract your monthly expenses from your monthly income, and you will hopefully have income left over. If not, it’s time to do some juggling.

Look at each expenditure carefully. Where can you cut back? Some things to consider are: using coupons to lower grocery bills, turn down the heat in your home, pay off credit card debt, or consolidate it for lower monthly payments. You will be surprised at how much you can save on little things, such as limiting expensive coffee drinks and lunches at work. Skip the fast food and pack a healthy lunch instead. You may be able to shave several hundred dollars per month from your current expenses.

Now that you know how much you have to spend, it’s time to create a monthly budget. Budget first for non-negotiable payments, such as mortgage, utilities and car payments. Next, estimate how much you will need for items such as groceries, gas, entertainment and other adjustable bills. Set your limits low, and if you can’t get by the first month, adjust your estimates accordingly.

It is very important to plan for emergencies like a broken-down car, or leaky roof. If you have no savings, these problems will usually end up on a credit card, costing you a fortune in interest. Start slowly, with maybe 25.00 per month. Whenever you can, add a little to this monthly amount and soon you won’t even notice it isn’t there. You will end up with a nice nest egg for emergencies or unexpected expenses. This will give you great peace of mind!

Now, you have the basics for a sensible monthly budget. Of course, you will need to adjust expenses according to your financial situation. Then, when you look at the first month and see that you have more money than usual leftover, you will see how easy a budget works and how it can lower your levels of stress and anxiety! If you are faithful to your budget, you may even be able to start funds for luxuries, such as vacations or a new car!