5 Steps to Building A Successful Budget
January 11, 2021
After a year as chaotic as 2020, many of us are reassessing our saving and spending habits in the hopes to get ourselves back on track in the new year. The first step to getting back on track for a successful year is to create a budget. Now, the trick to an budget is to make one that works for you and your lifestyle. We’re going to cover the basics of creating a personalized budget, as well as some tips to help you stick to it this year!
1. Layout Income & Expenses
The very first thing you should work on is getting all your monthly income together. Knowing how much money you have coming in is vital to creating a successful plan. With monthly income, comes monthly expenses. Once you lay out all your income (first job, second job, etc.) you need to compile a list of all expenses. And I mean ALL of it! Groceries, hobbies, insurance, cable, loan payments, cell phone bill – everything. Make sure you’re not only counting the reoccurring monthly bills – If you pay taxes annually, you’ll also want to plan for those.
Now sit back – how much money is going out vs coming in? You should be coming out positive – if you’re not, you’ll want to cut back where you can on some expenses.
2. Set Your Goals
After assessing your income vs. expenses, you can create a budget based on your goal.
- How much do you want to save?
- Are you setting aside funds for your retirement?
- Are you paying down a debt?
Decide how much you want to allocate to your different savings. Your goal should be to Earn, Save and then Spend. This means when your paycheck comes in, you first set aside funds to save and then spend what you need based on your budget.
You’ll want to figure out exactly how much you need to set aside to hit your goals. This might mean cutting expenses. Decide where you can cut back on your spending to make this happen and how you’re going to monitor this to stick to the budget. Some people like to use the envelope method – They set aside what they need for each budget (Groceries, gas, fun, etc.) in different envelopes and take the funds from there when they need them. This allows you to really see what you’re spending on. Remember you can also add multiple shares to your account and individually label them, this works exactly like the envelope method but has the added benefit of saving paper. Family First also has a personal financial planning system available as part of our mobile and web banking. Just look for the Money Management tab and you can start your budget online!
Remember: Not all Budgets look the same! Your best friends budget will more than likely look completely different than yours. And one more thing – Just because you’re following a budget doesn’t mean you need to change everything about your lifestyle. If you don’t want to give up your Friday morning Starbucks, that’s okay – just add it into your budget, and try to cut down elsewhere if you can. It’s important to keep your budget realistic for your lifestyle.
The chances of your budget working perfectly right off the bat are slim. You’ll find that certain things don’t work for you and that’s okay! Review your budget and adjust as needed. Be patient with yourself – You won’t find success over night. Remember that you are doing this for YOU and YOUR financial future.
5. Keep Checking In
Hold yourself accountable! By checking in regularly you are reinforcing your commitment to your budget and your long-term goals. It’s important to acknowledge that creating a budget takes patience, time and hard work. Remind yourself that your hard work is worth it, and every step that you make is a step towards financial stability and wellness.
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