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9 steps to building a budget that works

No matter what your income is, building a budget is the first step to creating a workable spending plan. Seeing where your money is going every month can help you feel more in control and make it easier to achieve your financial goals. 

You can create your budget using a paper worksheet, a digital app, or a combination, but commit to writing everything down. Writing down your goals can help make them more tangible and likely to achieve.  

While the beginning of the year is a great time to review your finances, learning the basics of financial wellness can happen any time. And it鈥檚 easy to get started. Here鈥檚 a step-by-step approach to building a budget that can work for you. 

1. Gather all of your financial documents

To create a budget, you鈥檒l need to gather your financial documents, including pay stubs, credit card, bank account and investment statements, regular monthly bills, and any other records of your spending and income.

2. Record your income

Get an accurate portrait of where your money comes from and how much you have available to meet your monthly expenses by recording your income. This should include guaranteed income streams, such as salaries, pensions, and Social Security, as well as any variable sources like investments or part-time work.

3. Track your monthly expenses

For one month, track your expenses and keep a detailed log of where your money is going. Track everything from larger, fixed expenses like rent, mortgage, and your car payment to variable expenses, such as groceries or daily lunches. 

Fixed expenses = Bills that are typically the same every month, like a mortgage, car payment, or utilities

Variable expenses = These are items that may change month to month

4. Analyze your income and expenses

At the end of the month, take your total income and subtract the expenses from it. If the expenses are less than the income, you have money left to put toward other goals. If not, then you may need to look at your overall spending. The bill calendar can help you monitor spending habits. 

5. Separate expenses into categories

Look at your total expenses and separate them into categories. Not all expenses carry the same importance. Prioritize your basic needs, such as housing, food, and healthcare. Evaluate lower priority expenses and set a budget for each of them. Small expenses can add up fast and wreck your budget. This step can help you visualize what you have been spending vs. what you want to spend for each category.  

6. Set financial goals

Whether it鈥檚 paying down debt, adding to a college fund or planning for retirement, setting short-term and long-term financial goals can keep you on the right track. 

Pro tip: Shoot for a monthly spending total that鈥檚 60 percent of your gross income so that you have money left over for other goals.

7. Plan for the unexpected

Unexpected expenses are a part of everyday life and your budget should account for them. Build an emergency savings fund that can cover at least three to six months of essential expenses.

8. Review your budget regularly

The economy, your personal finances, and the cost of goods and services can all influence your financial picture. Review the budget on a regular basis to determine if your spending and saving habits are in line with your goals. Adjust for any necessary fluctuations.   

9. Enlist the help of a financial professional

A financial professional can help answer your questions, whether they鈥檙e about basic day-to-day budgeting or more complex long-term scenarios. You can also work together to assess your current situation and discuss a plan for meeting your financial needs and how to stay on track going forward.

The bottom line: Budgeting is more than just tracking income and expenses; it鈥檚 about crafting a strategy that helps you feel confident and secure in your financial journey.  

Need help getting started?

Download our free budgeting worksheet to track your income and expenses. You鈥檒l be able to see how much you spend and how much you save to help meet your financial goals. 

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