Due to the current economic hardships that are affecting everyone, knowing how to manage your money effectively is becoming a necessity. One of the best ways to manage your finances is by budgeting.

What is a Budget?

A budget is simply a detailed summary of the money that you have coming in (income) and going out (expenses). Knowing how to properly manage finances, whether it be via a financial advisor or on your own, is important in ensuring your money is benefiting you as much as possible. Whether you already incorporate a budget, or are looking to start doing so, there are several ways in which you can ensure that your budget is the best it can be.

Budgets are meant to help you better manage your money. Implementing these different techniques, if you don't already, is a definite way to improve your overall financial situation. You must simply be determined to stick to it. However, you must not have the mindset that budgeting is a "punishment". As a matter of fact, it is a good idea to occasionally set aside money for fun activities. For example, after one debt has been paid off, a "reward" can be granted. This type of system, along with the other mentioned techniques, may serve as motivation to help you see the benefits of your smart budgeting.

Put it in writing.

First and foremost, a budget should be in writing. Having your budget in writing leaves no room for forgetting or mistakes. The form needed to create a budget can be easily accomplished by downloading a free budget spreadsheet or budgeting software from the Internet that you can print out or refer to on your computer as necessary. Doing a quick Google search along the lines of "free budget worksheet" will provide you with many different options from which you can choose. The more proficient computer user can make changes in a downloaded budget sheet, or simply create their own budget sheet via a word-processing or spreadsheet program. The important thing is to be sure that you have a form or worksheet that you can use to properly write out your budget


Once you have the budget worksheet you will use to manage your budget, you need to establish organization.…  The best way to organize a budget is with itemized expenses, along with their respective payment amounts and total balance owed.…  Prioritize the expenses from largest amount owed to smallest.…  Pay off larger debts first, and as you pay off a debt, put that freed money towards another debt or expense on your budget.

Needs and Wants.

Budgets should consist of mostly needs, not wants.…  Needs include things such shelter, food, clothing, and car expenses.…  Examples of wants may include fast food and weekly pedicures.…  However, as aforementioned, budgets should consist of mostly needs, meaning wants should be kept to a bare minimum, at least until the budget allows for it.

Miscellaneous expenses.

Every good budget should have a category for "miscellaneous" expenses. Miscellaneous expenses include the unexpected expenses that always seem to come up, such as needing a replacement cell phone. By setting "backup" funds aside specifically for these things, you always have the funds available for unexpected expenses.

Budget per paycheck.

Another way to improve your budgeting is to arrange your budget per paycheck, instead of monthly. This can make it easier to see where the funds from each paycheck is going, as well as easier to implement the practice of setting aside money for infrequent bills, or bills that aren't paid monthly, such as a car insurance. By doing this, you will be pleasantly surprised when those bills are due to see that you have the money to the pay the bill, instead of facing the possibility of not having the necessary amount at the time.

Resist temptations.

One of the basic but most important factors of a successful budget is to resist temptations that may cause you to break your budget. This varies by individual, but may include things such as shopping at the mall or ordering out to your restaurant. Doing this will prevent you from causing other necessary expenses to suffer, and therefore defeat the whole purpose of your budget.