If you're new to budgeting, it's important to understand what a budget is and how it helps you examine what you earn and how you are spending that income. A budget is a financial plan that takes income and expenses into account and provides estimates for how much you make and spend over a given period of time.
Addressing your financial situation and distinguishing between needs and wants is an important first step before creating your annual budget. Acknowledging areas where you are overspending can be an eye-opening experience. Creating a budget and sticking to it can help you save and reach your short- and long-term financial goals. This is not a one-time exercise. Revisit and review your budget if you have a financial windfall or setback, as it reflects your current situation.
The next step is to create your monthly budget using the basic Budget Worksheet. If you find you cannot stick to your budget, it may mean you are spending beyond your means or that your budget is not flexible enough. Take the time to review and readjust your budget monthly until you find a plan that works for you.