4 Steps to Creating & Sustaining a Budget

For many adults, creating a budget can feel frightening or overwhelming.

And being able to stick to a budget can feel like an impossible task.

But a budget is one of the most important financial tools a person can establish for themselves. It’s also something anyone can benefit from, no matter their age or income.

How a person manages their money can dictate how their life is lived — it can either help or hinder their goals and dreams. And may take days, weeks, and months easier — or tougher — depending on their money management.

Whether you have credit debt, student loans, or you want to save more for the future, creating a budget you can stick to is one of the best ways to control your finances.

With the new year underway, there’s no better time than the present to get your finances in order.

Here are four useful ways to create a budget and stick to it that will help your financial future:

1. Examine Your Current Financial Situation

To start a budget, it’s important to first understand the current state of your finances.

Take a look at your checking and savings accounts, credit cards, and any source(s) of income. Then, track at least one month of spending to determine where your money is going.

To see a larger trend in spending, examine three months or more.

Using a spreadsheet or budgeting notebook, assign categories for each expense. Then begin to track any money that is spent, including cash transactions.

Once you have taken the time to track your income and expenses, it’s time to review how the money is being spent — and how much is being saved.

2. Review Spending & Income

Reviewing the categories where money is being spent most frequently might surprise you, not to mention how much has been spent.

Perhaps you’ve been overspending on a particular service without realizing it.

Understanding how your money is spent can help to determine areas that need improving — like spending less on takeout or movie rentals. While these are fun purchases to make, small changes can decrease spending in large ways.

It’s important to identify areas of concern before making your budget. This step can also help you determine how much can be spent elsewhere or saved.

If you’re spending more than you make each month, you are not alone. Simply knowing how much is spent on food, streaming services, and utilities among others, can be eye-opening.

This is one of the most important ways to save money, especially on a tight budget.

3. Identify Needs & Goals

The next step to create a budget that works for you is to determine your needs and goals.

At the top of the list are items that should fall under the “needs” category. These are items you cannot live without.

Take this opportunity to ensure your budget will cover necessary items like shelter, food, utilities, and transportation.

And use this as a chance to recognize your obligations and bills. Mortgage or rent payments, credit card bills, student loans and many others are considered necessities and should be paid before spending money on luxuries.

Then identify your financial goals. Whether it’s saving for retirement or purchasing a new home, incorporate these goals into your budget.

It’s easier to stick with a budget if you are working towards a financial goal.

Keep in mind that your financial goals and budget can look different than those of your friends and family.

Focus on your budget, financial goals, and what you can do to be successful.

Food, shelter, and bills should be at the top of your list, whereas a new television, pool, or other luxury items will fall into the “wants” category.

It’s nice to be able to treat yourself, but not at the expense of your bank account or savings account.

4. Stick with the Budget

Now that you have a clear vision of your goals and what constitutes as a necessity compared to something you want, it’s time to stay the course.

But how?

Whether you use a budgeting app on your phone or have a spreadsheet hung on your refrigerator, it’s important to have it easily accessible to keep yourself motivated and on track.

You don’t need to look at it every day but keeping it prominent in your life helps keep your finances top-of-mind.

Being on a budget also means learning how to say “no.” This could happen in a variety of ways, like preparing meals at home rather than having lunch delivered or going out.

The amount you spend at any given time may feel small, but it can add up rather quickly.

Disciplining yourself and learning when to say “no” is crucial in staying on track with your budget.

If there’s some wiggle room, incorporate ordering lunch at work, going to concerts (once we can again!), or another “want” into your budget. Just remember to track the expenses so you know how much it is costing you.

Use Budgeting Tips to Climb out of Debt & Save for the Future

It goes without saying that we want to live comfortably and be able to retire one day. To do so, we need to have saved enough and reduced as much debt as possible.

Establishing and sticking to your budget can help you achieve this goal, among others.

For more financial advice and ways we can help you stay on track, contact our team of financial advisors today.