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A balanced household budget is something that all people need, but few actually have. Budgets are great for showing you the money leaks in your life. (If you want to frighten someone whose finances are out of control, suggest that they tally up their income and expenses!) But don’t worry — the process doesn’t have to be painful. You just need to take a moment and get organized first.

Get Your Records In Order

You can’t construct a household budget if you have no idea where your bank and credit card statements are. If you don’t already have a filing system for your financial records, set one up — NOW! It doesn’t have to be complicated. A single folder for each account (and each category of expense) will do fine. Then go through all your stacks and piles to get at least the current year’s documents into your new system.

Track Your Expenses

The best way to keep track of your cash is to use some form of a log book, computer program, or app. Regardless, create a list that includes static expenses (things that cost the same amount every month) and variable ones (those that fluctuate from month to month) — as well as those that come in chunks throughout the year (like insurance payments or registration fees). You might need to go through your last 12 months’ statements to get a clear idea of how much daily life actually costs you.

Most folks don’t have a clue where their money goes — especially when it comes to expenses racked up because of financial disorganization (interest on your credit card debt, late fees because you forgot to pay a bill on time, overdraft charges because you didn’t balance your checkbook, that sort of thing). While other costs are necessary and non-negotiable, your goal will be to eliminate these from your budget.

Tally Up Your Income

Do you really know how much you make? It sounds pretty impressive to say, “I make $60 an hour,” or “I make $150,000 a year.” But after taxes and social security and other items deducted from your check, what are you actually bringing home? If you’re self-employed, consider all the non-billable hours (spent marketing, handling administrative duties, and attending professional meetings) you put into running your business. Take a minute to really examine all of your sources of income and calculate an honest total — you can’t have a realistic budget without it!

What’s The Verdict?

When comparing income to expenses, how does it look? If you came out in the black, congratulations! If you ended up in the red, let’s find some spending that can be reduced or even eliminated. Start with any late fees and interest charges — a good bill-paying system will take care of these. Also look for convenience expenses — times when you spend money unnecessarily because you’re overwhelmed, too busy, or just worn out. (Re-evaluate how you use your time, and you’ll see that most of these costs are symptoms of misplaced priorities.) When all of your spending decisions are deliberate, you’ll find yourself several steps and quite a few dollars closer to a balanced household budget.