Make a Budget #1

Jan 4, 2012 by

As we start 2012, I plan to focus several posts on Budgeting. This is No. 3 in a multi-post Budget series, and the first post covering my “6 Steps to Create a Great Family Budget.” Click the Budget Category link to see them all.

Free Download of the Money Counselor Make a Budget Series

If you’d like to get all of the Make a Budget series posts in one neat PDF file, please write to me (click Free Advice at the top of the page) to get the password, then enter it through the Free Downloads link at the top of every page of this site or here:


If you read the first two Budget posts, I hope you’re convinced making a budget is worth a try. Fear not if you don’t know where to begin. This and a few more posts to follow will walk you through the 6 Steps that I think work well to help you make a great budget. What makes a budget great? It’s not how well you forecast your fortunes or misfortunes during the upcoming year. The measure of a budget’s value is how well it helps you make better money decisions. And that’s the sort of budget my 6 Steps are designed to make.


A pencil, pad of paper, and calculator are all you need. If you like computers, a spreadsheet program like Microsoft’s Excel works well. Or you might want to buy (check eBay) one of the popular family money management software programs like Quicken. These programs make it easy and even fun to put together your budget, but they do much more. For example, each family member can enter their spending as the year unfolds. Then the program will compare your family’s budgeted and actual expenses by the categories you set up (rent, gasoline, groceries, etc.). This makes it easy to track your spending compared to your budget plan. Check the budget worksheet links on the sidebar for other tools.

No matter what tool you use, here’s how to start making a budget

Step 1: Write down near, medium, and long-term money goals—a “wish list”—for your family. Don’t think yet about whether there’s enough income. Getting every family member involved in this goals discussion helps and is more fun. Example goals:

  • Pay off $10,000 in credit card debt within three years.
  • Over the next year, build an Emergency Savings fund of $4,000.
  • Start putting money aside for the kids’ college education. In thirteen years, have $20,000 saved.
  • Save $2,000 for a family vacation to the Rocky Mountains in two years.
  • Save $750 to send a kid to hockey camp next year.
  • Save $10,000 over three years for a down payment on a house.
  • Replace an aging car one year from now with a used car costing $8,000 or less.
  • Make $5,000 IRA contributions for both family wage earners

Don’t feel like you have to come up with every single goal your family may have. Just identify the five or ten most important to you now. They’ll change, so don’t worry about that.

Step 2: Write down your family’s monthly income. For now (more about this later), if anyone is paid every other week (26 paychecks per year), don’t include the two “extra” paychecks a bi-weekly wage earner will get during the two months per year that three paychecks are received.

The next Budget post will cover step 3 in my handy-dandy “6 Steps to Create a Great Family Budget.”

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