Establishing a budget and sticking to it isn’t easy, but it’s the best way to be in control of your finances and make sure your money is going toward the expenses that matter most to you.
Follow the steps below as you set up your own, personalized budget:
- Make a list of your values. Write down what matters to you and then put your values in order.
- Set your goals.
- Write down your goals.
- Think about what you want to accomplish financially in the next three months, the next year, and the next three years.
- Determine your income.
- Figure your available income (the amount of your take-home, or net, pay).
- Do not include overtime pay, because you shouldn’t rely on that as regular income.
- Determine your expenses.
- Review your checkbook register, credit card statements, store receipts, and more. Where is your money really going?
- "Fixed expenses," such as a rent, auto, or student loan payments, are easy to determine.
- "Flexible expenses," such as food, clothing, and entertainment, vary from month to month.
- Don't forget about expenses, such as taxes or insurance, that are billed quarterly, semi-annually, or yearly.
- Look into personal finance software programs that offer a budgeting feature to help you track these expenses.
- Create your budget.
- Think of your budget as a “spending plan,” a way to be aware of how much money you have, where it needs to go, and how much, if any, is left over.
- Your budget should meet your "needs" first, then the “wants” that you can afford.
- Your expenses should be less than or equal to your total income.
- If your income is not enough to cover your expenses, adjust your budget (and your spending!) by deciding which expenses can be reduced.
- Pay yourself first!
- Saving is a very important part of protecting yourself financially.
- Save as much as you can every month. Even a small amount can make a big difference if you keep it up.Check out our savings calculator to learn more.
- A great goal is to establish an emergency savings fund large enough to cover three to six months of your living expenses.
- After you have an emergency fund, your savings can go toward meeting your goals.
- Be careful with credit cards. Learn more.
- Check back periodically.
- Be sure to review your budget regularly.
- Does the plan still meet your needs and help you achieve your goals? If not, make some adjustments or create a new budget that better meets your needs.
Ready to budget? Use our budget calculator!
FAQs
Key Takeaways. The 50-30-20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should dedicate 20% to savings, leaving 30% to be spent on things you want but don't necessarily need.
What is budget mapping? ›
Budget mapping is a geographic approach to looking at the budget and displays what bureaus intend to spend throughout the City.
What is the 40 40 20 budget? ›
What Is Grant Cardone's 40/40/20 Rule? Cardone's 40/40/20 rule is part of his overall wealth creation formula, which says that you should earn as much income as possible and save as much of that income as possible until you can afford to invest in income-producing assets.
What is the 40-40-20 rule? ›
The dictum is that 40 percent of your direct marketing success is dependent on your audience, another 40 percent is dependent on your offer, and the last 20 percent is reserved for everything else, including how the material is presented. The following is a brief breakdown of the 40/40/20 rule of direct-mail marketing.
What is Mint budgeting? ›
Mint is your personal finance manager and bill tracker - it helps you track expenses, transactions, monthly budgets, account balances, subscriptions, expenses and taxes. We calculate your net worth and spending trends and help you with your budget plan. We'll help manage subscriptions and notify you when prices go up.
What is a budget grid? ›
A Budget Grid is the detailed budgeting of hours, roles and resources. It serves as the structure for project budgeting as well as the baseline for planning your resources. A Budget Grid template is simply a pre-defined budget structure that you can leverage when creating a quote(s) or project(s).
How do you do budget projections? ›
To generate your financial forecast, follow these steps.
- Define Your Focus Areas. First, identify the key metrics the forecast needs to cover. ...
- Update with the Latest Financial Data. ...
- Establish a Forecasting Period. ...
- Identify Patterns and Trends. ...
- Adjust for Influencing Factors.
7 Steps for Making a Life Plan
- Step 1: Look at What's Not Working.
- Step 2: List Your Values.
- Step 3: Look at the Future.
- Step 4: Lay Out (Small) Steps.
- Step 5: Tear Down Road Blocks.
- Step 7: Build Structures and Put Up Boundaries.
- Step 7: Ask for (and Accept) Help Along the Way.
Personal finance expert Dave Ramsey says if you're going through a tough financial period, you should budget for the “Four Walls” first above anything else. In a series of tweets, Ramsey suggested budgeting for food, utilities, shelter and transportation — in that specific order.
What is a future budget called? ›
A budget forecast is a projection of the budget. This means it's a key component of variance analysis or any P&L budget vs actuals model. The budget forecast references the budget instead of historical values, which is especially helpful for organizations with inconsistent historical performance.
Does the idea of creating a budget seem overwhelming? It shouldn't. You can start having more control over your finances today by using the three P's: paycheck, prioritize and plan.
What are the 4 A's of budgeting? ›
Spending a few minutes each week to maintain your cash management program can help you to keep track of how you spend your money and pursue your financial goals. Any good cash management system revolves around the four As – Accounting, Analysis, Allocation, and Adjustment.
What are the 3 R's of a good budget? ›
Refuse, Reduce and Reuse.
What is the disadvantage of the 50 30 20 rule? ›
Cons. Percentage guidelines don't work for everyone: For some people, the 50/30/20 budget just isn't realistic — especially with today's rising cost of living. If, for example, debt alone takes up 20% of your budget and your needs far exceed 50%, you may need to take a different approach.
How would the 50 20 30 rule break down your take-home pay? ›
50% of your net income should go towards living expenses and essentials (Needs), 20% of your net income should go towards debt reduction and savings (Debt Reduction and Savings), and 30% of your net income should go towards discretionary spending (Wants).
How are the categories broken up for the 50 30 20 rule? ›
The rule goes like this, each month, your after-tax paycheck is broken down into three buckets: 50% for needs. 30% for wants. 20% for savings.
When might the 50 30 20 rule not work? ›
It disregards people with irregular income.
The 50/30/20 rule also doesn't account for people with variable income, like freelancers or the self-employed, who may struggle to stick to it every month.
