Budgeting is the process of managing and balancing your finances. It also helps you to plan for your financial future. Deducting expenses from income is the core of budgeting. When the result is a deficit, the logical next course of action is to take steps to put your finances back in balance. That involves making changes to either income, expenses or both. It might take some time and sacrifice, but it is possible to budget around a deficit and eventually reach balance -- maybe even a healthy surplus.
1. Examine your existing monthly budget worksheet thoroughly. The budget worksheet should show all of your costs and income sources on a monthly basis. Check the past quarter to half a year of worksheets for a thorough view of your finances.
2. Compare your latest worksheet, which shows the deficit, to that of previous statements to see where major changes occurred. Pinpoint the potential issues for correction. For instance, you might have had a huge electric bill this month compared to previous months. You must now watch your electric usage more closely. On the income side, you have taken an unpaid week off of work in that month that caused the deficit -- you might have to brainstorm ways to replace the lost income in the coming month to get the budget back on track.
3. Itemize your variable personal expenses, which are the household costs that change each month. Decide where you can afford to reduce or eliminate those costs --- at least temporarily until the budget is back in balance. For instance, you might lower your cell phone or cable plan for a few months. Take a month off of eating out or spending money on frivilous entertaining.
4. Focus next on your revenue sources. Determine your budget deficit after you've made cuts to your expenses, then figure out a way to make that amount in extra income for the month. For example, you might sell items in an online auction, hold a yard sale or ask for overtime hours at work.
5. Take all necessary actions to budget around the deficit immediately. You might have to resolve the deficit in the following month by tightening up your spending today so that your bills are lower later. Dedicate each dollar of extra income you bring in toward the deficit until your finances are again in balance.
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