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Do's and Don'ts: Making a Budget

Sometimes in your busy daily life, you may lose track of your finances. We often forget what we spend and lose sight of our financial goals. You may want to live one day at a time, but there's great benefit in having a plan. Developing a budget will help you be in control of your finances and allow you to start saving money efficiently for any short or long term goals. A budget is a useful tool in planning what you'll be spending each month and making sure you have enough money for the next month and beyond. The following list provides helpful “do’s” and “don’ts” in creating a budget.


DO think of your budget as a planning device and a way to reach your financial goals.

DO take the time to figure out where your finances are now. Keep track of your monthly expenses to determine where you spend your money. Add up monthly income from all sources. After you subtract your expenses from your income, you will be in one of three situations: (1) your income and expenses may be about equal; (2) your expenses may be more than your income; or (3) your income may be more than your expenses. No matter what your situation, you need to make some judgments about it.

DO take the time to make a personal balance sheet. Make a schedule of your assets and liabilities to find out your net worth.

DO set personal financial goals for yourself. Are you saving for the down payment on a new home? Maybe you would like to buy a new car in the near future. One of your goals might be to maximize the contribution to your 401(k) plan. You may want to take a vacation to Hawaii next year.

DO prioritize your goals. Saving a down payment for a new home may be more important to you right now than maximizing your 401(k) contribution. Because you only have limited resources, you will have to allocate them according to your priorities.

DOlimit your budget projections to a couple of months ahead until you get the hang of it. After that you can budget further ahead.


DON'T think of your budget as cast in stone. Although you do need self-discipline to stick to a budget, things change. Expenses go up (and income can go down), so you will have to revise your budget accordingly.

DON'T create a budget that is too strict. Give yourself some wiggle room, especially with expenses for goods or services that you feel you can't live without.

DON'T get frustrated if you do not immediately comply with your budget. In all likelihood, you have forgotten some regular expenses. Use your budget as a guide. If you overspend in the same category every month, you probably need to change the projected amount for that category.

DON'T try to use somebody else's budget. You need to make personal decisions about how your family will allocate its resources. Your budget should reflect the personal goals, priorities, values, and hopes of your family.

DON'T give up! With perseverance, you can develop a realistic budget that can help your family achieve its goals.

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