Budget Right: How to Create a Budget

In order for you to budget right, you need a budget to work with. Many people are dumbfounded at the idea of creating a specific amount for each category of their spending. Why would anyone want to do that? Isn't budgeting just for those with tiny incomes? I'm here to tell you that its something EVERYONE must do in order to achieve financial freedom, whether you're a multi-millionare or living near poverty line.

The Basics

The best way to start your budget is to begin with some recommended percentages. I'll give Dave Ramsey's suggestions for each category, but bear in mind that if you make less or more the degree of percentage can differ.

1. Charitable Gifts- 10-15% (its good stewardship to give to others and then yourself. However, if your income doesn't allow for this much, don't fret. Just give what you think is a reasonable amount. It's very important to get into the habit of giving and to write it into your budget).
   
2. Saving- 5-10%
3. Housing- 25-35% (if your housing is eating up any more than 35% of your income, I would suggest considering making more money or moving to a more affordable residence)
4. Utilities- 5-10%
5. Food- 5-15%
6. Transportation- 10-15% (I would include car insurance here)
7. Clothing- 2-7%
8. Medical/Health- 5-10%
9. Personal- 5-10%
10. Recreation- 5-10%
11. Debt- 5-10%

These percentages are certainly simply a starting point for figuring out your budget. For example, my husband and I do not match some of these percentages, but we do use them as a framework for what we want to aim for. This will differ among households.

For free budget software, check out mint.com. For financial and further budgeting advice, check out JessicaSwingle.com. For free budget spreadsheets and more information, check out Christian Personal Finance.