Budgeting 101: 4 Steps to Setting a Budget That Works
Quick Summary
Learning how to budget and stick to a budget that works not only helps you manage your finances better but also provides you with a sense of financial security.
How many times have you created a budget for yourself only to neglect it days later? You're not alone—setting and sticking to a budget is one of the more difficult aspects of becoming financially secure.
It's not impossible, however. Here are four easy steps to get started:
Record and evaluate everything
A crucial part of budgeting is getting in the habit of doing a regular budget review. Understanding where every dollar goes will help you discover areas where you can cut spending more easily. Create a written list or spreadsheet, then update and analyze the information at least monthly and annually. Check with your financial institution—they may have online budgeting tools that can help you.
Track everyday spending
Once you know how much you typically spend, it's easier to adjust your spending to save money. Start with your groceries—make lists and set a specific amount to spend. After a few weeks, you'll figure out how much it takes to feed your household and you won't need to eat out at restaurants nearly as often.
Utilize technology
Technology is your friend when it comes to budgeting and saving money, but only if you stay away from unnecessary spending.
There are plenty of money management apps to fit different strategies—whether you prefer envelope budgeting, zero-based budgeting, managing finances as a couple or cutting costs by tracking subscriptions. Look for apps with strong encryption to keep your data secure and consider the cost-to-value ratio before paying for premium features.
Don’t forget about your own financial institution's mobile banking app. Many offer free tools that let you securely check balances, transfer funds and even aggregate all your accounts in one place. These apps often include budgeting calculators, spending trackers and goal-setting features—all at no extra cost.
Set goals you can meet and exceed
Make your budget successful by determining your why. Ask yourself why having money in the bank is important to you. Why is it better to feel financially secure than survive paycheck-to-paycheck?
Most people determine they want to be financially secure so they can pursue passions post-retirement. If that includes you, consider filling out a retirement income calculator to determine how well you’re preparing. Improve your retirement outlook by evaluating your preparedness, changes in the economic climate, inflation, achievable returns and your unique personal situation.
<h6>Budgeting strategies</h6> <p>If detailed budgeting is not your thing, there are simpler, more straightforward budgeting strategies that can help you reach your financial goals. First, try instituting the 50/30/20 budgeting guideline that suggests dividing your after-tax income to spend 50% on needs, 30% on wants and 20% on savings and debt repayment. Once you know how your income should be divided, try one of these easy budget plans:</p> Zero-based budgeting—Every dollar of your income is assigned a specific purpose—such as expense, saving or debt payment—until your balance is zero.
Envelope budgeting—Allocate a specific amount of money to various spending categories, often using cash in labeled envelopes (physical or digital), and stop spending once the envelope is empty.
Ready to put these budgeting tips into action? Schedule a complimentary appointment with one of our financial guides. They'll work with you to create a personalized plan that fits your lifestyle and goals—no judgment, just guidance.
