A budget is a financial spending and savings plan that’s used to help you meet your goals and find financial wellness. Everyone’s budget is different, but the basic rules are the same–assign a percentage of your income to a few different expense categories, then only spend that amount each month.
Determine your income: Start by adding up all the money you receive each month, including wages, child support, disability payments and any other sources of income. Next, subtract any taxes or deductions that come out before you get your paycheck. The remaining number is your spending money. Then, divide your spending money into two piles: needs and wants. Needs include things like shelter, food and utilities. Wants are discretionary items, such as entertainment, dining out and travel. Try to avoid using credit cards for these items.
Track and adjust: Create a spreadsheet to track your expenses over time. Compare your actual costs to your budgeted ones and make adjustments as needed. For example, if an expense is much higher than expected, look for ways to reduce it without sacrificing quality or efficiency. This could involve negotiating better vendor contracts, finding energy-saving measures or simply changing your spending habits.
Save for the future: Budgets can also help you save money by helping you earmark funds for emergency situations or long-term goals like retirement. A good budget might even encourage you to pay down debt or avoid new loans altogether.