Budgeting is one of those things that most people are put off by but if you get the hang of it, it’s very easy and helps keep you on track with your expenses month to month.

Your budget should be prepared each month before the budget month starts. If you’re budgeting for May, you should have your budget prepared by the end of April. This way you’re one step ahead and are never surprised by where your money will be going.

Here is your budget in a simple formula: Income – Expenses = 0

There are excellent apps today such as EveryDollar or Mint that help you with budgeting. You can also track everything in an Excel sheet or simply go for the old pen and paper method.

Pay yourself first.

The first person you should pay when your income comes in is yourself. Whether you can only pay yourself 5% or 25%, get into the habit of putting money aside

Housing/Rent

Whatever your rent is, it’s going to most likely be one of the biggest line items on your budget. If you find that your rent is much too high for the amount of income you’re making, consider getting a roommate, renting out a room, or moving to a cheaper area.

Transport

One of the other big line items will be how you get around. If you own a car and are paying for insurance, tune ups, and general maintenance, this is the line item where you will put in that information. If you use public transportation, calculate how much you’re paying for bus and metro passes and subtract it as well.

Food

I recommend separating this into two categories – buying groceries and going out to eat. It’s important to keep track on how much you’re spending on more frivolous activities such as going out to eat and how much you’re spending on actual necessities, which is the food you’re buying for your home.

Utilities

How much are you paying for your energy bill? If you don’t know, it’s a good idea to find out. Money Expert Energy is a great page for comparing energy prices and it also helps you decide if you need to switch providers.

Other Expenses

Clothing, recreation, travel, whatever it is that you find yourself spending money on, put that here. So if you go shopping quite a bit or you prioritise traveling, make those line items in your budget so you can control the amount of money you need.

Miscellaneous

This category is in here to catch anything that you may have missed. If you find that you didn’t add in an expense in one of the above categories, this is the place to put it.

Debt

This is the most important category yet. If you’re paying off student loan debt, credit card debt, or anything else where you owe money to another entity, put it here. If you calculate all of your other expenses and you don’t have any money left over for this category, go back and take away from others.

So if you added a line item for clothing because you like to go shopping, take money from that line item and add it to this one. If you paid yourself 20% in the first line item, maybe pay yourself only 10% this month to balance out your debt.

Whatever your situation, this above should aid you in managing your monthly budget and getting you on track with your finances.