Creating a budget can help you determine how much money you’re spending each month and how much you have left over after expenses. This is helpful to make sure you will have enough money to meet your needs and determine if you may need to spend less on some things to save money for an emergency fund or to meet your long-term financial goals.
Here are four steps to help you get started:
1. Keep track of your expenses. Track your expenses for at least 30 days. Keep receipts for cash purchases and review your bank and credit card statements.
2. Categorize your expenses. Categorize expenses to determine where your money is being spent. List your debts — such as mortgage, rent, auto and personal loans — as well as living expenses including utilities, groceries, insurance, child care, charity and streaming services. The more categories you create, the more accurately you can track your expenses and identify areas where you may be spending too much money.
3. Set realistic goals. Short-term goals include setting up an emergency fund, paying down credit card debt or saving for a vacation. This can take one to three years. Long-term goals include saving for retirement or your child’s education.
4. Create your budget. Use your net income and documented expenses, then regularly review your budget. You may want to consider setting specific spending limits for each category of expenses, so you have money to save for your short- and long-term goals. You can do this by determining your monthly needs, such as auto insurance and gasoline, and your wants, such as dining out or monthly subscriptions, to see where you can cut costs.
Use this worksheet to keep track of how much money you spend this month. Then, use this month’s information to help you plan next month’s budget.
Learn more about the steps to creating a budget in this Blue Cross Virtual Well-Being℠webinar, Developing Healthy Money Habits for Financial Freedom. You can also sign up for future employer- or individual-focused webinars and guided meditations here.
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