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Creating a Realistic Budget

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Creating a Realistic Budget One of the most overlooked components of creating a budget is making sure it is realistic.

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Don't bite off more than you can chew.

Reducing expenses by 50% is unrealistic, whereas reducing expenses by five or ten percent is much more realistic, and attainable.  

Step 1: Track 

Get a notebook and a pen and write down all of your expenses for two weeks. Include every expense, whether it is your mortgage payment, or your $5.95 vanilla half-caf frappuccino latte from your favorite coffee house.

Be diligent and thorough. This information will serve as the foundation for your budget. 

Step 2: Organize 

You can use graph paper, or use Excel, to create your personalized spending plan.

There are several free sites such as http://www.mint.com/ or http://www.bundle.com/ which can also be used.

Categorize the expenses in a way that makes sense to you. Entertainment, medical, housing, transportation, and groceries are a good place to start.  

Step 3: Trim the Fat 

This is the difficult part. It is time to identify and cut expenses.

Remember the $5.95 vanilla half-caf frappuccino latte? Time to cut it. Gym memberships, magazine subscriptions, cell phones, and cable packages are all great items to review and cut if you are not using them on a regular basis.

Make the cuts realistic. You don't have to starve or go without basic necessities and essentials.  

Step 4: Review 

Sit down every three months and review your spending.

Based on your performance, you may find other areas to cut, or find that you have done such a good job that you can put a few extras back in!  

Related Posts:

Building a Household Budget: Where to trim the "fat"

2011 Debt Resolution: Creating a Budget

How to Get My Budget Back in the Black After the Holidays 

Rob TaylorRob Taylor

Rob is a contributing writer for the A Straight Talk on Debt blog. Rob has been in the business of helping people get out of debt for the past six years. He is a product manager with the CareOne team and focuses on making debt relief plans even better.

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