7 Simple Steps to Create & Stick to a Budget

A happy woman saving in jars.
  1. Determine Your Income: Calculate the total money you earn each month. Include all sources of income, such as your salary and side gig earnings. Remember that how much money you take home is different (and lower) after taxes, too. So, it’s best to consider your actual take-home amount.
  2. Identify Your Expenses: List all your expenses, including rent, groceries, entertainment, loan payments, and any other necessary payments. It may be helpful to group expenses into specific categories, such as fixed (monthly expenses that don’t change) and variable (monthly expenses that vary). You can find out approximately how much you spend each month by reviewing your checking and savings accounts through online banking.
  3. Set Financial Goals: Clear goals will help you stay motivated and focused on your budget, so decide what you want to achieve with your money. You should also set short-term and long-term financial goals, such as identifying what you’re saving for within the next three months and in the next one to five years. For example, you might save to go on vacation in a few months and buy a new car in the next year.
  4. Allocate Your Income: Divide your income into categories based on your expenses and goals. Generally, experts recommend the 50-30-20 rule. For example, you should allocate 50% of your income to fixed expenses like rent, utilities, and transportation, 30% to groceries and entertainment and 20% to savings and debt repayment.
  5. Track Your Spending: Compare your expenses against your budgeted amounts. There are many tools to help you track income and spending, including free spreadsheet tools and budgeting apps. Comparing expenses and your budget plan will help you monitor your progress and identify areas where you might overspend.
  6. Make Adjustments: If you’re consistently overspending in certain areas, look for ways to cut back. Explore saving opportunities, such as reducing unnecessary expenses or finding cheaper alternatives.
  7. Review & Repeat: Regularly review your budget to see how well you’re sticking to it and if any adjustments are needed. Then, make budgeting a habit and repeat the monthly process to ensure you’re staying on track.