Budgeting 101: How to Create a Budget

Creating a budget

1. How to make a budget in 5 steps
2. Try a simple budgeting plan
3. Allow up to 50% of your income for needs
4. Leave 30% of your income for wants
5. Commit 20% of your income to savings and debt repayment

1. Figure out your after-tax income. If you get a regular paycheck, the amount you receive is probably it, but if you have automatic deductions for a 401(k), savings, and health and life insurance, add those back in to give yourself a true picture of your savings and expenditures.
2. Choose a budgeting plan. Any budget must cover all of your needs, some of your wants and — this is key — savings for emergencies and the future.
3. Track your progress. Record your spending or use online budgeting and savings tools.
4. Automate your savings.Automate as much as possible so the money you’ve allocated for a specific purpose gets there with minimal effort on your part.
5. Revisit your budget as needed.Your income, expenses and priorities will change over time. Adjust your budget accordingly, but always have one.

A budget is a plan for every dollar you have. It’s not magic, but it represents more financial freedom and a life with much less stress.

We recommend the popular 50/30/20 budget. In it, you spend roughly 50% of your after-tax dollars on necessities, no more than 30% on wants, and at least 20% on savings and debt repayment.

Don't worry! We've got your back here!😉

Your needs — about 50% of your after-tax income — should include:

• Groceries.
• Housing.
• Basic utilities.
• Transportation.
• Insurance.
• Minimum loan payments. Anything beyond the minimum goes into the savings and debt repayment category.
• Child care or other expenses you need so you can work.

If your absolute essentials overshoot the 50% mark, you may need to dip into the ‘wants’ portion of your budget for a while.

Separating wants from needs can be difficult. In general, though, needs are essential for you to live and work. Typical wants include dinners out, gifts, travel and entertainment.

It’s not always easy to decide. Is a gym membership a want or a need? How about organic groceries? Decisions vary from person to person.

Every budget needs both wiggle room and some money you are entitled to spend as you wish.

Use 20% of your after-tax income to put something away for the unexpected, save for the future and pay off debt.

Make sure you think of the bigger financial picture; that may mean two-stepping between savings and debt repayment to accomplish your most pressing goals.