What to Consider in Setting Up a Budget

Starting a budget-and sticking to it-can be a worthwhile and rewarding endeavor. All you need is some foresight, stick-to-it-ness and the belief that a little scrimping will pay off with big dividends down the road.

Some Ideas to Consider:

Start with the Basics

First, determine your income. Then subtract what you expect to spend on a monthly basis for fixed and variable expenses. Fixed expenses may include your car payment, rent, electric bill payments and other non-negotiables. Variable expenses include items such as groceries, entertainment expenses and clothing. While you cannot cut back on fixed expenses, you can examine your variable costs to find areas to save.

Practice Moderation

Now look for opportunities to economize. Can you cut back on those morning lattes from five days a week to two? Instead of buying books, how about borrowing them from your local library? Saving does not necessarily have to entail overhauling your lifestyle. Small changes can lead to significant savings over time. Also, make sure to set aside money (around 10 percent of your income is best) for your personal savings. You can set up a passport account, CD or IRA and make regular deposits. You'll be happy you did.

Track Yourself

Check your budget on a monthly basis to see if you have budgeted accurately. Don't hesitate to adjust your budget. If you spend more on dining out than clothes, give more money to this area. Also, if an emergency arises, plan to take some money from a variable expense to cover a repair. If you have money left over, put it in your savings account.