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Financial Planning: Budgeting

What is a Budget?

A budget is a spending plan you can create to keep track of your income, and your spending. You can create a worksheet, or a spreadsheet using software such as Excel, to track how much money you spend, and how much money you earn, by week, month or the year. Creating and updating a budget can help you manage your finances.

You can use a budget to:

  • Manage your finances for a short or longer period of time
  • Set financial goals for yourself (such as buying a car, house, etc.)
  • Save money for unexpected emergencies or other financial problems

 

How to Budget

  • Add up your income (after taxes), from all sources (paycheck, Social Security, investments, etc.)
  • Track your weekly (or monthly, or yearly) expenses. These may include automatic payments, subscriptions, utilities, food and drink purchases, and any other reoccurring expenses. You may want to use a spreadsheet, app or program for this. 
  • Set your financial goals, such as saving for expensive items, or saving for unexpected expenses (such as home repair, medical costs, etc.) you may have in the future. 
  • Calculate mandatory expenses you expect to pay (as opposed to non-essential purchases), such as rent, taxes, costs of childcare (if you have children), etc. 
  • Add any debt payments to your budget, such as student loan payments, car payments, credit card payments, etc. You may want to adjust the payments you make each month (the minimum required or more), depending on how much money you have available. 
  • With all of this information, create a spending plan that will insure your income is higher than your expenses, and adjust your budget accordingly. The money you have left each month can be saved for future use (such as financial emergencies), used as discretionary income for non-essential purchases, or both. 
  • Adjust your budget, as needed, to accommodate an increase (or decrease) in income, a change in expenses, and meet your goals. A budget can always be flexible, depending on your needs.