6 Steps for Building a Budget

Learning to manage your finances by creating a budget can create a strong foundation for financial success. Learn to effectively create a budget in 6 steps.

Step 1: What is your monthly income?

Identify how much money you have coming in each month. You should include your salary, side hustles, and any other form of profit.

Step 2: Write down your monthly expenses.

Write down each item you spend your monthly income on. Begin with things such as mortgage, rent, utilities, car payments, and groceries. Add non-necessity items such as subscriptions, dining, and entertainment.

Step 3: Categorize and Prioritize your expenses.

Pleace each expense into two categores, “Fixed” and “Variable". Fixed costs are expenes that do not change which can include housing (mortgage, rent). Variable costs are expenses that can fluctuate in price such as groceries and entertainment. Prioritize necessities first, then allocate a portion of the remaining funds to wants.

Step 4: Do you have realistic goals?

Create short savings term goals that can be accomplished within a month and long-term savings goals that can be accomplished within a year or more. Each can include items such as an emergency fund or vacation. Identifyin your goals can encourage you to make mindful spending decisions.

Step 5: Develop a Spending Plan

After writing doen your income and expenses, develop a spending plan. Use the 50/30/20 rule— allocate 50% of your funds for needs, 30% of your funds for wants, and 20% of your funds for savings and debt repayment. Commit to the plan, but also plan for occasional flexibility.

Step 6: Track, Review, and Adjust

Each month you will track your spending. If you overspend in one category, you will adjust the remaining categories to adhere to your planned budget to accomplish your goals.

You got this!

Don’t be intimidated of building your budget. By having transparency of your own income, expenses, and goals, you can develop a spending plan that will contrubute to building wealth and financial security, one step at a time.