When it comes to preparing a personal finance budget, there are a lot of different methods advocated by different people.

Some ideas work better than others, and in many cases it doesn’t matter which method you use. However, here is one system that we think is best for the average consumer.

The principle behind this method of preparing your personal finance budget is that you need to be pro-active rather than reactive.

That is, instead of keeping track of the money you spend and then saying, “Well, apparently that’s where all our money is going,” you should reverse the process.

At the beginning of the month, tell yourself, “THIS is where my money will be spent this month.” Map it all out. Spend it all on paper FIRST, and then follow your plan throughout the next month. That way, there are no surprises.

Here’s what you do to create a personal finance budget:

• Sit down with your spouse or partner.
  It’s vital that you both be involved in the personal finance budget planning process, so that both of you feel invested in making it work.
• List all of your fixed expenses, the ones that are the same every month and that you can’t change.
  Rent or mortgage, car payments, and minimum credit card payments fit in this category. Also include things like gym memberships and cable TV bills.
• List the expenses that are variable.
  Things like your utility bills, your gasoline expenses, your groceries, and so forth fit into this category. These are probably about the same every month, but you do have some control over them.
• Look at the list and see if anything can be reduced or eliminated.
  Are you paying for a gym membership that you never use? Has it been weeks since you’ve actually watched any of the Netflix DVDs you have lying around? Could you reduce your cable or satellite package to a less expensive one?
• Once you’ve realistically determined what all your necessary expenses are, look at your income for the coming month.
  Hopefully it’s more than your expenses! Map out exactly where all of your income is going to be spent that month. Think of it as a dry run: You’re spending your money “on paper” in preparation for the real thing.

The advantage of this system is that there are no surprises.

You know what your expenses are for the month, and you know how you’re going to pay for them. This eliminates a lot of the stress and anxiety of following a personal finance budget, and it makes it much easier to stick to the plan.

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