Here’s how to create a budget for yourself

Once you understand your monthly spending habits, you’ll be able to make adjustments and empower yourself to save for the future.

Tags: Budgeting, Home, Planning, Goals, Be prepared, Accounts, Banking basics
Published: June 14, 2018

Establishing a monthly budget is a basic financial practice that can help you meet your monthly commitments as well as put you in good shape to save money. You can get started in just a few easy steps.


Step 1: Identify monthly income and expenses

Step 1: Identify monthly income and expenses

Start by listing your net monthly income — be sure to include all sources of income — and your known monthly expenses. Your expenses should include:

  • All payments that you make on a monthly basis, such as rent or mortgage, utilities, your car payment and other expenses.
  • The average monthly cost of expenses that you pay quarterly, semiannually or annually, such as car insurance, property taxes or some utilities.
  • The average cost of purchases that typically occur each month but can vary from month to month. For example, entertainment, dining out, dry cleaning, groceries, parking and gifts.
  • An amount for unforeseen expenses like a car repair or an appliance replacement.
  • Typical costs of the “little” things like that daily latte or buying lunch out.
  • Last, but definitely not least, add in an amount for short-term and long-term savings. Saving is easiest when it’s a built-in part of your monthly budget.
Step 2: Add it all up

Step 2: Add it all up

Add up your income and all your listed expenses. You’ll come up with one of three results:

  • Your income exceeds your expenses. Great! Now you can look at using some of that “extra” to pay off credit card debt or to add money toward your short- and long-term savings goals.
  • Your income and expenses are equal. This is good. But just to protect against the unexpected, or to meet other financial goals, consider cutting back on some of the “little” expenses. It can be as simple as packing your own lunch instead of dining out or taking the bus instead of driving. Doing so can provide a nice cushion when you need it.
  • Your expenses exceed your income. This is a situation that you’ll want to analyze and take steps to correct. Below are tips on how to cut costs.
Step 3: Adjust expenses

Step 3: Adjust expenses

Take a look at your budget and honestly identify the things you can eliminate or reduce from your expense list. Many options are likely to come from the list of “little” things. If you’re not seeing much there, try recording everything you buy over a period of a week or two. A month is even better. You may be surprised by how easy it is to buy “little” things that really add up. For example, a $3 latte every workday can add up to $60 a month and over $700 a year!

Other ideas for reducing expenses:

  • Watch for sales and specials, especially for frequent purchases such as groceries and clothing.
  • Buy in bulk and use coupons when you can.
  • Pass up a Saturday night out with friends. Instead, invite them over for a movie and popcorn.
  • Buy mid-tier concert tickets instead of the best seats in the house.
  • Cut down on luxury services like massages, manicures and pedicures.

Once you have your budget defined and any adjustments made, it’s a good idea to review it periodically, even monthly, to update based on financial changes in your life.


Inspired to save? Here are nine simple strategies for saving on daily expenses. Or if you’re ready to put your extra money to good use, get started with a savings account!  

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