A budget is a manageable plan that helps you decide how your money is saved or spent each month. One way to kick off budget planning is by using a budget calculator to help allocate money for your unique needs.
How to budget money
Whether you’re looking to manage your monthly expenses, or plan on making a big purchase, setting up a budget is an important part of your financial health. Knowing where to allocate your money can give you greater control over your finances. Budgeting is about taking control of your money and making a plan to live within your means. It can help you build better habits, understand your spending and reach your goals.
Generally, budgeting starts with tracking your expenses, managing your debt and building a safety net fund. The key to budgeting is properly allocating your funds and consistently devoting a portion of your paycheck towards your savings when possible. Four steps to help you budget include:
- Assess your situation. Make a list of money coming in and money going out in a given month. You’ll want to take a look at your after-tax income to get an accurate view of your situation.
- Prioritize your spending. Determine your needs and wants so you can budget accordingly.
- Create a budget. Monitor your regular expenses and track your monthly spending with a budget worksheet (PDF). An ideal budget should cover all your needs, some of your wants and savings for emergencies and the future.
- Stay on track. Keep tabs on your spending and adjust your budget as your goals change. Your income, expenses and priorities may change over time, so you’ll need to adjust your budgeting techniques accordingly.
Common budget categories to consider
Some major expense categories that you may want to consider including in your budget are:
Housing
Whether you’re paying rent or a mortgage, housing is a consistent expense and basic need. If you’re a homeowner, your housing costs may include not only your mortgage but a budget for home repairs too.
Food and groceries
Food budgeting and planning can be one of the categories that can be the trickiest to manage and may take time to find the ideal figure. Some people include household supplies in this category like toothpaste, paper products and more.
Utilities
Your monthly utility costs may be different each month depending on your usage. For example, your water and electricity might not always be the same depending on the season. It’s helpful to list them on your budgeting plan and assume …….