For some people, the only thing less fun than doing taxes is creating a budget. But a good budget means that you can do many of the things you want to do, such as taking a vacation or buying a new car, without worrying about where the rent money will come from. And if you're realistic, a good budget can be remarkably easy to create and maintain.
Start with the basics
A budget is a way to figure out where your money comes from, where it goes, and how to end up with money left over at the end of month. That's the bottom line: Spend less than you make and save the difference for specific goals of your choosing. Basically, budgeting consists of four steps:
Step 1. List your income
For most people, that's take-home pay. You can't avoid paying taxes or health insurance. If you have other sources of income, such as Social Security or IRA distributions, add those in, too.
Step 2. List your fixed expenses
These are the expenses that have dire consequences if you don't have enough money to pay them: rent/mortgage, utilities, insurance, car loans, credit cards, medicine.
Step 3. See what you have left
If you don't have anything left, you need to reassess your income and expenses and perhaps even take drastic measures, such as selling your car, moving to a cheaper place or seeking a better-paying job.