Creating a budget can seem like a daunting task…and actually sticking to it can seem even harder!

Although it might not be an easy task, creating a budget that works for you is a key component of your financial success.

Watch Budgeting Techniques Video

Evaluate Your Income

The first step in creating your budget is to determine how much income you have coming in each month. Account for everything you have coming in, including your payroll, child support, pension, your spouse’s income, alimony, and anything else. When in doubt, it’s best to underestimate and not overestimate. Only count your guaranteed income; leave out bonuses and estimated commissions.

Evaluate Your Spending

Track how much you are spending in a month; once you sit down and look at where your money is going on paper, you might be shocked to find out how much you’re spending. Unlike evaluating your income, you want to overestimate you spending instead of underestimating it. Take a look at your credit and debit card statements over the past few months to find where you are spending. If you pay cash, start taking a log of everything you spend.

Create Priorities

Now that you can see where you’re spending money each month, it’s time to break it down into needs, wants, and savings. Your fixed expenses such as a mortgage payment, medical expenses, and overall living expenses should take priority in your budget; those are your “needs.”

Next up: debt. Think of paying off your debt like you would rolling a snowball down a hill. Work to pay off the smallest debt first – while paying the minimum required amount on the larger debts. Once the smallest debt is paid off, proceed onto the next larger debt above that, and so on and so forth until you pay off all your debt.

The faster you pay off your debt, the less interest you will pay, and therefore the more money you can save in the future. Entertainment, traveling, and dining out are your “wants,” which are things you can cut back on to create more room for needs and savings. The good news is, when you eliminate debt, you’ll have more discretionary income for the “wants” you may have to sacrifice in the short-term to achieve long-term budget success.

Stick to It

Sticking to a budget is like sticking to a diet; it takes effort to meet your goals at first, but eventually it becomes habit. Make sure there is room in your budget to still occasionally treat yourself and have some fun. Think of your budget as a guideline for your finances to keep you on track for a better financial future!

Need help budgeting? Download our free budgeting worksheet to help you prioritize! Feel like you need more help? Set up a one-on-one free counseling session with our Director of Financial Literacy, James Davidson by completing the form below.