Budgeting sounds easy, but it is often more complicated and difficult than it first seems. While many people may be discouraged even to begin budgeting, there are countless benefits to budgeting. People who budget suffer from less financial worries and end up having savings that they can use for a vacation, emergency expenses, and a down payment for a house or car. Here is how to get started in creating a budget.

The first step to creating a budget is to determine your expenses. There are two main types of expenses. Fixed expenses are costs that do not change over time, such as a monthly cellphone bill or rent payment that is the same every month. Variable expenses can include things such as entertainment, shopping, and dining out. They may vary from month to month. In the case of variable expenses, you will have to estimate a reasonable monthly or annual expense amount.

After expenses are determined, the next step is to determine your income. Remember that your actual paycheck will be smaller than the amount listed because of tax, retirement, and healthcare deductions. Know the actual income you bring home every month and don’t budget based on your gross or pretax income. You should include income such as gifts, side jobs, rental income, and child support as well. The important thing is to have an accurate picture of both your expenses and income.

With an accurate picture of your expenses and income, you can now set yourself some financial goals and make adjustments as necessary. Look at your expenses and income and see if there is a budget surplus (income higher expenses) or a budget shortfall (expenses higher than income). If the expenses on your list are greater than your income, then you must trim expenses or increase income. If your income is already higher than expenses, then you are in good shape, but should still try to cut back and save more if you can.

It is important to set financial goals that are realistic. Creating unachievable goals will set you up for failure. Goals should also be specific as this will motivate you to actually save up for that car instead of just stashing money away and then spending it on the first impulse.

With information on income, expenses, and some financial goals, the last step is the implementation. Keep track of your spending and income. Be sure to hold yourself (or have someone else hold you) accountable and stick to your budget. Make adjustments as necessary, and be sure to give yourself a cushion by budgeting for unexpected expenses. This will prevent an unforeseen event from derailing your entire budget.

The information provided above is a suggestion. Please seek advice from your financial advisor before making any financial decisions.