The first step in budgeting is knowing why you are making a budget. Are you going on a trip, wanting to pay off debt, or just cut back on your spending? Knowing why you are making a budget will help you stay on track and determined to follow through with it.
Each dollar in your income should be assigned a category. This means that you are giving each dollar a purpose. You know where your money is going, whether it be towards expenses or your savings!
Create categories you want to budget for. Some top ones are groceries, mortgage/rent, car payment, utilities, bills, savings, dining out/entertainment.
List your income: This will be your net income. If you have a side hustle, put that income in as well! This will help you know how much money you have to use in the month.
List your expenses: List out all monthly expenses, this could be bills, groceries, gas, rent/mortgage, etc.
Subtract expenses from income: You will need to subtract the total amount of expenses from your total income. This will tell you if you have enough to cover all expenses in the month. If you have leftover money, assign it! If your expenses are higher than your income, you will need to adjust your spending.
Track your spending: Look back at all your transactions from the past month and see how they fall into your categories. Did you budget $300 for groceries but only spend $200? You can adjust your grocery budget for the next month. Tracking transactions makes you realize patterns of your spending and see where you can cut some spending out.
Don’t forget to “Pay Yourself First!” This means allocating a portion of your monthly income to go into your savings account. You can even set up an automatic transfer to your savings once a month, this will help you reach your savings goal even faster!
This blog is not on behalf of Peninsula Federal Credit Union.
« Return to "Blog"