The first step is to get a good picture of your finances. You can use the Budgeting Worksheet included in your guide materials to help you record your income and expenses. Begin by writing down all sources of income. This may be just your paycheck, but don’t forget to consider other possible sources of income, such as a spouse’s salary, income from rental property, investments, or COLA and OHA payments.
Next, determine your expenses. There are several ways to go about this. One is to gather bank and credit card statements from the last few months. Taking the average of a few months’ expenses may give you a more accurate picture than just one month. The simplest approach is to categorize spending as either essential or non-essential. Essential spending can include fixed expenses, such as rent, insurance, and utilities. Non-essential spending can include entertainment, trips, eating out, and other discretionary purchases. That’s a good start, but you may wish to further divide your spending into categories like housing, transportation, personal, administrative, and entertainment. Within those categories, you can get more specific. The Budgeting Worksheet lists a number of examples within each spending category, and you may think of some others that are not listed. For now, don’t worry about missing something. You can always refine your list later on. Additional resources that can help you with this process include a number of affordable software programs and interactive versions of our worksheets shown to the menu on the right.
While bank and credit card statements are good for recording purchases made with checks and cards, you might also consider carrying around a small notebook or keeping receipts to help you track cash purchases. The idea is to get as complete a picture as possible of where your money is going.
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