How to Create
Creating a budget is a great way to take control of your finances and reach your financial goals. Budgeting is a key to saving money and understanding how much you are spending. Many people to create and stick to a budget have less stress and a stronger financial understanding of their situation.
Steps to Create a Budget
Listed below are five major steps you can take to start creating and following your budget.
- Track your income and expenses: The first step to creating a budget is to track your income and expenses. This will give you a good understanding of where your money is going. You can track your income and expenses using a budgeting app, a spreadsheet, or even just a notebook.
- Set financial goals: Once you know where your money is going, you can start to set financial goals. What do you want to achieve with your money? Do you want to save for a down payment on a house? Pay off debt? Retire early? Once you know your goals, you can start to create a budget that will help you achieve them.
- Choose a budgeting method: There are many different budgeting methods out there. Some popular methods include the 50/30/20 budget, the envelope system, and the zero-based budget. Choose a method that works for you and stick with it.
- Create a budget: Once you’ve chosen a budgeting method, it’s time to create a budget. Start by listing all of your income sources. Then, list all of your expenses. Once you have a list of your income and expenses, you can start to allocate your money.
- Review your budget regularly: Your budget is a living document. It should be reviewed regularly to make sure it is still working for you. As your income and expenses change, you may need to adjust your budget accordingly.
Popular Budgeting Methods
There are many different budgeting methods out there. What is most important is finding a budget that works for you. Everyone is in a different stage and situation in life, so finding a budget that fits your system and lifestyle is key. Some popular methods include:
The 50/30/20 Budget.
This is a simple budgeting method that divides your income into three categories: needs, wants, and savings. 50% of your income should go towards needs, 30% should go towards wants, and 20% should go towards savings. Needs are the expenses that are necessary for your survival, such as housing, food, transportation, and healthcare. Wants are the expenses that are not necessary for your survival, but that you enjoy, such as entertainment, dining out, and shopping. Savings are the expenses that you set aside for future goals, such as retirement, a down payment on a house, or an emergency fund. The 50/30/20 budget is a great way to get started with budgeting, as it is simple to understand and follow.
The Envelope System
This budgeting method involves dividing your cash into envelopes, each labeled with a different category of expenses. Common categories for budgeting include: Housing, Food, Transportation, Utilities, Entertainment, Clothing, Debt repayment, and Savings. When you spend money, you take it out of the appropriate envelope. If you run low or out of money in one envelope, you can transfer more from a different envelope. This method can help you stay on track with your spending.
The Zero-Based Budget.
This budgeting method involves allocating every dollar of your income to a specific category. This includes your needs, wants, and savings. This method can help you ensure that you’re not overspending in any category because it forces you to think about every dollar of your income. This can help you stay on track with your spending and reach your financial goals.
UCCU offers a free and powerful budgeting tool right inside our UCCU Mobile and Online Banking. You can automatically generate a budget based on your past spending with just a few steps. Easily see and monitor your budget at-a-glance. Using the budget tool or manually keeping track of your budget can help keep your spending within healthy limits.
Income Splits for Budgets
There is no one-size-fits-all answer to the question of how much of your income should go towards each category in your budget. You may need to adjust your budget based on your individual circumstances. For example, if you have a lot of debt, you may want to allocate more of your income towards debt repayment. Or, if you have young children, you may want to allocate more of your income towards childcare.
Additional Tips on How to Budget
There are many different ways to budget and keep track of your money. Listed below are additional tips that can help you pinpoint your budget to best fit your needs.
- Be realistic about your income and expenses: It is important to be honest with yourself about how much money you have coming in and going out each month.
- Track your spending: One of the best ways to get a handle on your spending is to track it for a month or two. This will help you see where your money is going and where you can cut back.
- Be flexible: Your budget will not always be perfect. Things will come up and you will need to adjust your budget accordingly.
- Don’t give up: Budgeting takes time and effort. Don’t give up if you don’t get it right the first time. Keep trying and you will eventually find a budgeting method that works for you.
By following these tips, you can create a budget that works for you and helps you reach your financial goals.