One of the best ways to stay out of debt and ensure that credit bureaus have a good credit rating on file is to prepare a monthly budget and stick to it. Those that use fly by the seat of their pants financing generally crash and burn, whereas those that have a plan stand a better chance of paying bills on time and still having cash left over.

Expenses

The first step in making a budget is determining where all income goes. Computer programs such as Quicken may be of some assistance in this area, but a good old fashioned pen and paper method will work just as well. It is important to not only keep tabs on credit card, debit card, and check transactions, but to make sure that cash transactions are kept on record, as well. It is a good idea to keep tabs on expenditures for at least two months so that that budget accurately reflects what is an average expenditure each month rather than relying on data from one month that may or may not be representative of the entire year. Make different categories for each type of expense. For example make different categories for things such as food, home, insurance, education, travel, taxes, transportation, taxes, etc. By getting a good idea of where all their money is going, an individual can begin to see patterns of spending that need to be modified in order to make ends meet more efficiently.

Income

Knowing what money is spent where is only half the battle when making a budget. Knowing how much money is coming in is just as important. Make a list of income sources. Some of the more common include paycheck from work, alimony payments, child support payments, interest on savings, pension or retirements plan income, and any governmental assistance that is provided.

Stick It Out

If total expenditures are more than total income for a given month then the budget may need to be adjusted. Try and eliminate unnecessary expenses such as subscriptions to magazines or newspaper or perhaps cook a meal at home rather than ordering out for pizza. Remember to keep only the luxuries that are most important and discard the rest. Those that follow this plan are sure to see more financial success and earn themselves a good credit rating with the credit bureaus.