How to Manage a Budget

••• Jupiterimages/BananaStock/Getty Images

Writing down your budget is the easier part of managing a budget, and for many people the idea of budgeting stops there, but the execution of the budget is the key to making it effective. Managing a budget takes work and persistence. To be successful, you must work on your budget every day and be mindful of every penny you spend. Once you have the system down, you may be able to step back from your budget, but it will take several months of close monitoring before you reach that point.

Make a list of your monthly expenses. You can use the receipts from the past few months to average out how much you spend on groceries and other categories. A successful budget has a category for all of your spending habits and needs. Total the amount of your monthly expenses.

Subtract your monthly expenses from your monthly income. If the number is negative, you need to cut back on your expenses until you reach a zero dollar amount. If the number is positive, you can apply the extra money toward savings or getting out of debt.

Decide how you will track your spending in each budget category. Some people do it with paper and a pencil, while some use computer software that also balances their checkbook. Other people use an online budgeting system to track their spending in each individual category. Another option is to use an envelope system where you put cash in an envelope and stop spending once the money is gone.

Record any spending you did during the day each evening. This will let you know how much you have left before you go shopping the next day. Daily accounting for your spending makes you more aware of your decisions and helps you control your impulse purchases.

Transfer money between categories as necessary. For example, if you have an emergency room trip you had not budgeted for, you can transfer money from other categories, such as entertainment, to cover the unexpected cost. Transferring between categories will keep your budget balanced and prevent you from running a deficit over time.

Stop spending money when you have run out. Many people will continue spending on their credit cards if they have to. Managing a budget successfully means you stick to the limits you have set up for the month.