Creating A Budget
Creating a detailed monthly budget is a great way to get a snap-shot of your overall financial picture. There are two chief components to every budget: income and expenses. By weighing your total income against your total monthly expenses, you can create a simple and straightforward way to live within your means and forge a manageable financial future.
Income
Your total monthly earnings include all sources of income including salary, interest on your accounts, child support payments, etc. If your payroll does not automatically deduct income taxes you should make sure to factor them separately as an expense, as your lender will use your gross income (after taxes) for their mortgage calculations.
Expenses
Any payment remitted is considered an expense. It's best to consider expenses on both a daily and monthly basis; how many times a day do you pay for something out-of-pocket? How often do you write personal checks? What bills do you pay every month (or quarterly or bi-annually)? Double check that you've accounted for all of your expenses, from your morning coffee to your car payments.
Budget Form
As you will see on the next page, we've simplified the budget creation process by itemizing some of the most common income sources and expenses. Use the chart as a skeleton guide to create your own monthly budget. Don't omit anything, and remember that each month your expenses will vary. Keep a close eye on your spending habits and double-check at the end of the month to see how close you were to your ideal budget.
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