The second step to developing a budget is to plan what direction you want your finances to take. This step involves setting financial goals and deciding how to allocate money in your budget on various spending and saving categories. Setting financial goals will make sure your money is doing what you want it to do. Financial goals should be realistic, specific, and measurable, have a definite time frame, and imply the type of action to be taken. Next, you should allocate categories in your budget that align with your financial goals and income .
Income is inflows of cash to an individual or household.
The third step to developing a budget is to select a budgeting system. A physical budget involves using envelopes, folders, or containers to hold the money or slips of paper that represent the amounts allocated for spending categories. This system allows you to actually see where your money goes. Financial advisers recommend a written budget . A written budget can be kept on notebook paper or in a specialized budgeting book.