Step Two – Income and Outflow

It can be shocking to find out how you have been spending your money – particularly when you have nothing to show for it. It might not help to compare what you are spending to what you are bringing in each paycheck. Looking realistically at these amounts can often be scary. But it’s okay, admitting there is a problem is half the solution and the fact that you are working through this budget process is proof that you want to change.

Step Two

Using the list of expenses you made earlier (by keeping a running total of all that you have been spending) add all the monthly expenses that you pay out regularly (rent, mortgage, car payment, credit cards and any other payments). Now total up the amount of money that you are spending in each month.

Next you will make a list of all the money that you are bringing in – paychecks, interest, and allowance – anything that would be considered income. You will need to total up all of these amounts as well (if you are paid weekly then use 4 weeks to get your working number).

Look at your two totals. If your outgoing amount is higher than your incoming amount you are living beyond your means. It is time for some serious restructure of how you live your daily life.

The next step is to find a way to balance your income and outflow (eventually working to a point where your income actually exceeds your outflow).

Step One