Establishing your income and expenses accurately is the first step toward creating a budget. Gather all post-tax sources of post-tax income (such as regular paychecks or occasional grants), then calculate an average monthly figure to start. Before setting out your expenses for the month, identify which expenses are essential and which are non-essential. Necessary spending includes rent or mortgage payment, utilities bills, food costs, and transportation fees, while nonessentials include entertainment and Starbucks lattes as nonessential spending items.
1. I Want to Save
An effective savings plan begins by creating an accurate picture of your income and expenses. You can create a budget using either an Excel spreadsheet or a mobile application and track spending as it occurs. Trimming unnecessary spending can help you make progress toward reaching your savings goals; making meals at home instead of dining out and reducing impulse buys could be very worthwhile investments in saving.
Saving 10%-20% of your net monthly income is often recommended, although this figure may depend on your goals and circumstances. Saving more may become easier if extra cash comes your way, like tax refunds or holiday bonuses.
2. I Want to Spend
First, identify how much you typically spend each month by reviewing bank and credit card statements or using a budgeting app. Include both necessary expenses such as rent, utilities, food, and transportation as well as optional spending such as dining out and entertainment in this analysis.
Next, compare your expenses with your income. If your expenses outstrip your earnings, spending cuts must take place. Start by reviewing recurring payments and cancelling those you no longer require or shopping around for cheaper prices on essential services; this could save hundreds of dollars each year! Then use any surplus cash towards debt repayment or savings.
3. I Want to Pay Off Debt
Tracking spending and income doesn’t require an expert in math to be simple or efficient. Begin by listing all of your after-tax paychecks (or use one of many budgeting apps). Next, list recurring expenses, such as housing, food, transportation, debt payments, and utilities.
Consider all discretionary spending, which includes entertainment, vacations, and shopping. NerdWallet recommends following a 50/30/20 rule when allocating available cash: 50% goes toward needs, 30% toward wants, and 20% goes to savings, debt repayment, or retirement planning—helping prioritize spending while still leaving room for fun and flexibility.
4. I Want to Have Fun
Let’s face it: no one enjoys budgeting. Budgeting puts your mind and mood into an unpleasant place and makes it more difficult for you to enjoy yourself. Budgeting is an essential tool for reaching your financial goals, but it doesn’t have to be restrictive and depriving. By adding fun elements into your budget plan, you may find that it helps keep you on the path toward reaching it.
Start by creating a “fun” spending category in your budget, then track how much of it is being spent each month. Reward yourself every time you stay within this spending limit! This approach may be especially helpful in getting everyone on board to save for their financial goals!
5. I Want to Be Healthy
Though most budget advice targets those earning higher incomes, anyone can create a realistic and successful budget to become financially secure. Begin by calculating your earnings and expenses before seeking ways to reduce non-essential spending; review recurring payments such as streaming services and subscriptions and look for cheaper options or cancellation.
Utilize a budgeting app to monitor purchases and keep yourself on track. Meal prepping can save money while providing healthy meals; don’t forget about essential expenses like housing, utilities, transportation, and debt repayment. Periodically auditing your budget is also recommended.
6. I Want to Travel
As anyone who has planned a dream vacation can attest, travel can quickly add up in costs. Although travel can be fulfilling as a goal, it must also be balanced against other financial goals such as paying off debt or saving for retirement.
Nishann recommends starting to save for your trip early (if possible) and creating a savings plan so as to alleviate anxiety about expenses during the actual journey. She further advises avoiding credit cards if managing debt can impede future travel plans. Discover ways to reduce travel expenses, like shopping at second-hand stores or finding accommodations with kitchen facilities so that you can cook meals.
7. I Want to Eat Well
Budgeting advice may seem to target higher-income earners, but anyone can create a budget tailored specifically to their income level. One method involves creating a percentage-based budget that allocates your post-tax monthly earnings into categories for necessities, wants, and savings—such as monthly utility bill costs or savings goals.
Necessities should include your rent/mortgage payment, utilities, health care costs, and health insurance premiums; wants can include subscription services, dining out, and shopping. Next, set aside a percentage of your income for savings and debt repayment; this way you’ll have enough left over for savings and debt repayment goals. Keeping track of spending requires keeping receipts or using an app with category capabilities to track expenditures or reviewing bank/credit card statements to see exactly where your money goes.
8. I Want to Be Healthy
Budget advice often targets those with higher incomes; however, creating and sticking to a budget even with lower earnings is possible—simply calculate expenses against earnings before finding ways to cut costs. Start by taking stock of your monthly expenses and cutting any unnecessary spending that you can. For instance, switching to cheaper utility or mobile plans might save money.
Remember that creating and updating a budget should be considered an ongoing project; as your expenses or priorities change over time, your budget may also adapt accordingly. Plan to review it at least quarterly using an app or online tool designed specifically for this task.
