Here’s how to create a budget for yourself
Making and sticking to a budget can help keep you on track for reaching your short- and long-term financial goals. But if you haven’t done it before it can feel a bit overwhelming. The good news is that it isn’t hard to get started. And you can (and should) make adjustments along the way.
Establishing a monthly budget is a basic financial practice that can help you meet your monthly commitments as well as put you in good shape to save money. You can get started in just a few easy steps.
1. Identify income and expenses
Start by listing your net monthly income — be sure to include all sources of income — and your known monthly expenses. Your expenses should include:
2. Add it up
Add up your income and expenses. You’ll come up with one of three results:
3. Make adjustments
Take a look at your budget and identify things you can eliminate or reduce from your expenses. Many options are likely to come from your list of “little” things. If you’re not seeing much there, try recording everything you buy over a period of a week or two. A month is even better. You may be surprised by how easy it is to buy “little” things that really add up. For example, a $5 latte every workday can add up to $100 a month and $1,200 a year!
There are lots of ways to cut back on expenses, here are just a few ideas:
Once you have your budget defined and any adjustments made, it’s a good idea to review it periodically, perhaps monthly, so you can make additional updates as your financial situation changes.
Inspired to save? Here are nine simple strategies for saving on daily expenses. Or if you’re ready to put your extra money to good use, get started with a savings account.
Related content