How to Build a Budget

Getting Started with Budgeting

There are many products that can help you create your budget. You can use, paper and pen, downloadable apps for your phone, or even, Microsoft Office Excel, which has some pre-built-in templates for you to use to create a budget. Do your research and find the best option for you.

So, how do I create a budget?

First, list each source of income you have tracked. Make sure to add up your total income. Next, based on tracking your expenses, list out your monthly expenses. Be specific and thorough. Remember to include things like your groceries and miscellaneous expenses, car or health insurance, and entertainment expenses. Begin entering your expenses by each item in the actual column. Add up your total expenses. Review your income versus your actual expenses, some call this your cash flow.

Do your expenses exceed your income? Or do you have money left over?

Having money left over is a good thing! It is important to have a goal when saving money, this will help when you have an unexpected expense (e.g., your car breaks down, or you have to go to the doctor), to make sure you have the money to cover it! Or maybe you can afford to go on a vacation! Next, let’s actually set your budget, deciding what you are going to spend for the month.

Next to each expense, enter the amount that is your goal for that category. Some of your expenses are more stable, like rent and maybe internet, or insurance. Other expenses you have more control of, like food, or miscellaneous expenses. Make sure your projected expenses are reasonable and attainable, even if you have to sacrifice a little. Your goal for the month is to not spend more than what you budgeted.

Once you have entered in your projected goals for each expense, erase or delete the contents of the actual column. At the end of the month, you will go back through, and enter and evaluate your actual expenses for each category. You can see where you met your budget goals, and where you overspent. This will help you in creating a budget for the next month.

Each month you will go through this same practice. So, it’s a good practice to set aside time each month to work on your monthly budget.

50/30/20 Rule

This is a percentage-based budgeting method that focuses on balancing necessary expenses with personal spending and saving. First, calculate your monthly income after taxes and deductions are applied. Then, break your expenses out into the three categories.

What Makes a Good Budget?

A good budget is measurable, actionable, and realistic.

• Measurable, so that you can easily see how much you planned to save and how much you actually saved. It is also important to include the element of time – how much do you plan to have saved after X months?
• Actionable, so that you can actually implement your budgeting plan. You will need to have specific tactics or actions in mind that will further your goals and financial saving efforts. For example, this could mean putting X dollars away from each paycheck or limiting dining out to only once a week.
• Realistic, so that your budgeting aspirations are grounded in what is feasible. Your expenses should stay within the limits of your current income. Most budgeting plans are also designed for the long term, so you will need to give yourself a reasonable amount of time to see it through.