How to Create A Basic Budget and Stick to It

by | Dec 4, 2020 | Budgeting Advice | 0 comments

Are you looking to save money? Do you find yourself questioning where your paycheck goes every month? While it is a very simple concept, many people do not realize the value that creating a basic budget can have on their financial health. A budget is a plan that categorizes all your monthly expenditures and helps you allocate all the income you receive in a month’s time. This allows you to know how much money is already spoken for, necessary costs, and where you have some wiggle room for “extras” or to set aside money for savings. 

Budgets are often difficult to stick to, but once you have created your budget and practice these tactics, you can easily get in the habit of spending wisely and knowing when you have room to spend a little extra, and when you should avoid any unnecessary purchases.

Creating a Budget

There is no one-size-fits-all solution to creating a budget. The first step you will need to take in creating yours is choosing a system that works best for you and that is easy to understand so that you will actually refer to it on an ongoing basis. Whether it is a spreadsheet or an app on your phone, pick a method that is most convenient for you.

From here, you will need to start with your household’s total net income from the month and then subtract all recurring and necessary bills and purchases. These can include:

  • Mortgage or rent
  • Utility bills 
  • Phone bills
  • Insurance premiums
  • Car payments 
  • Groceries 

Some of these bills will have a fixed cost every month, while others, like groceries, will vary from month to month. For the variable bills, use a rough estimate when creating the budget. 

Once you have determined your recurring bills, you will then need to set aside an amount of discretionary money which can be used for one-time purchases, special events, or emergencies. 

After this is complete, you can then assess how much you have leftover to set aside for savings, whether it is in a personal savings account or a retirement account. 

A budget is a useful tool to help you accurately track your spending and create long-term financial goals. The key to remember is a budget is fluid and you can tweak it as needed, depending on how your financial situation evolves. 

For more helpful tips on how to save money, or to create a budget you will actually stick to, follow us on Budgeting Advice 101.