Creating and sticking to a budget will help you to not only cut expenses and reduce debt, but it will also help you to save and build your wealth. The process of building a budget forces you to categorize your expenses into needs and wants, so you learn where you can cut expenses. Also, it helps you to evaluate what you can actually afford giving your current income and expenses. If you know exactly how much you have to spend each month and prioritize your expenses, you will be far less likely to overdraw your account. Also, you can avoid having to pay bills with credit cards, which only increases your debt., This can be more challenging for some people than for others. If you are paid a salary on a weekly, bi-weekly, semi-monthly or monthly basis, it is easy to figure out how much you earn in a month. However, if you are paid hourly or your salary varies seasonally, it can be more challenging to determine your average monthly income.Those on a fixed salary can determine how many times they get paid per month and multiply that number by their net paycheck amount to determine their total monthly income. For example, if you get a bi-weekly paycheck, then you receive two paychecks per month. If your net paycheck after taxes is $1,250, then your total monthly income would be $2,500 ($1,250 x 2 = $2,500).
If you are paid bi-weekly, this means you receive 26 paychecks per year, or two extra, because two months of the year have will have three paydays. Be aware which months include this additional payday.
If you are paid semi-monthly, you will receive two paychecks per month, regardless of the length of the month, resulting in 24 paychecks per year.
If you get paid hourly or your income is irregular for any reason, then look at the last six to 12 months of paychecks.
Figure out the average you earn per month. For example, suppose over the past six months you earned $2,500, $3,000, $2,000. $1,800, $3,200, and $2,700. Add these amounts together to get the total ($15,200). Divide the total by 6 to get the average monthly salary ($15,200 / 6 = $2,533 per month).
 Determine your monthly recurring debt payments. Include car loans, student loans, credit card payments and mortgages. For credit card payments, find out your minimum monthly payment. If you have stopped incurring new debt, then these monthly payment amounts are not likely to change in the short-term and you can use them as expense line items in your budget. However, if you haven’t broken your dependence on credit cards, then creating this budget will help you plan to get out of long-term debt., Figure out how much you pay each month for other expenses besides debt. These expenses include household expenses, such as utilities and groceries. Transportation, clothing, cell phone and cable bills may be other expenses you have. Categorize your expenses in as much detail as needed so your budget makes sense for you. For example, some people may be comfortable with one line item for utilities, while others might prefer to break this down into electric, gas and water.If you are not sure how much you spend each month on some of these items, then track your expenses for a few weeks.
 Subtract your total debt payments and other monthly expenses from your total monthly income. If you have a positive balance at the end of the month, then that means you are spending within your means. You have an opportunity to invest some of your extra income and build your wealth. If you have a negative balance, then that means you are overspending. You need to evaluate your expenses and find ways to stop spending more than you earn., If you are overspending, then you need to look at your expenses and see what you can cut. This is where having gone through the exercise of categorizing your expenses will help you. It will help you to not only separate needs from wants, but also to see where most of your money is going.You may not be able to make adjustments on some of your line items. Some expenses, such as your rent or mortgage, may be fixed and cannot change in the short-term.
However, chances are that you will be able to find many other areas where you can reduce your spending. For example, many people begin by looking at how much they’re spending on food and plan to eat out fewer times per month.
Plan to pay down debt. If you can reduce your expenses for groceries, cable, cell phones and clothing enough, you can divert some of those funds towards paying down your credit card debts.
Plan to save as much as possible. Also, you should definitely plan to save up a rainy day fund of at least a few thousand dollars. Having this money put aside will allow you to pay for unexpected expenses as they come up without having to use your credit cards and incur more debt.
 Put aside at least one hour per week to review your budget. Now that you have made the effort to create a budget, invest time each week to look at your spending and make sure you are staying on track. If you become disciplined about monitoring and sticking to your budget, it will help you to avoid overspending each month. Not only will it help you stop living from paycheck to paycheck, but it will also help you to save some money and do some long-term financial planning.
Understand why making a budget is important.
Calculate your monthly income.
Find out your total debt.
Determine your recurring monthly expenses.
Evaluate the bottom line.
Plan necessary adjustments to spending.
Track your spending.
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