Whether you’re trying to become debt-free, build an emergency fund or save for a big purchase, a budget can help. But it can’t be one-size-fits-all — everyone’s income and expenses vary, so the way you create and manage your budget should reflect those differences.
To get started, gather your financial documents and make a list of your monthly expenses. Add up your fixed costs, such as rent or mortgage, car payments and insurance, as well as utilities and credit card payments. Then write down your variable expenses, like groceries, eating out and entertainment. Don’t forget miscellaneous costs, like gifts and charity contributions, as well as savings toward a special goal.
Next, compare your monthly expenses to your total income. This step can be eye-opening. It might reveal that you’re spending more than you’re making, in which case you’ll want to set some goals for yourself — like becoming debt-free within a certain time period, building an emergency savings account or saving up for a big trip. It might also prompt you to find ways to increase your income, like working overtime or getting a side gig.
Once you’ve set some goals, start to track your daily spending for a few weeks using whatever method works best for you — an app on your phone, spreadsheet, online template or pen and paper. The more detailed your record keeping, the better. Be sure to include all of your expenses, including those you pay with cash or check. And don’t forget to look over several months of bank statements, so you can be sure your budget is accurate.