Everyone, even a lottery winner, has a limited amount of income. There is even a television show that tells the stories of lottery winners that have lost everything in just a short time period. No matter how much money you have, you can’t continually spend more than you have coming in. Eventually you will use up all of your resources. Overspending can lead to enormous debt, bankruptcy, and/or foreclosure.

Being overextended can lead to bad credit which makes it hard to borrow money for a home, vehicle or other necessities when you need to. Bad credit can affect your ability to rent a home and can increase your insurance premiums.

Budgeting can help avoid bad credit and other calamities. Many people believe that they are already budgeting because they have an idea of what they spend and where they spend it. Some think they are safe because they don’t feel like they spend lavishly.

In reality, there is a little more work involved if you truly want to be a good steward of what you have been given. Creating a budget isn’t something that you do once and you are done. As your income and expenses change so does your budget. Your budget will also change as you get debt paid off, freeing up more money to go toward savings or household expenses or even a vacation.

Don’t let the word budget scare you. A budget isn’t meant to restrict you but to free your money up so that it can be used in the best way to benefit you and your family. A budget can help you get out of debt and take away a lot of stress and worry.

The first step to budgeting is to figure out how much money you are spending and where you are spending it. This can be shocking when you realize how much you spend a week on junk food when you stop to get gas or just run into Dollar General for a “few” things on regular basis. Often one spouse does the majority of the grocery and household shopping and the other spouse can’t imagine what their spouse has done with all their money.

Choose a time period (one month is ideal) to record every transaction. There are apps for your phone that you can use for this or a little notebook works just fine. Don’t wait until the end of the month and try to recreate all of your expenses. You will miss some. Do this as you go or at least at the end of each day.

When you have kept track of your spending for your set time period you will need to add in any monthly or annual expenses that you have. Once you have recorded all of your expenses for your set time period you are ready for step two of making a budget.

Subscribe to my blog to receive a budget worksheet to record your expenses by category. When you subscribe you will also receive an email letting you know when I have posted step 2 of this process.