If you’d love to live with a budget, but struggle to find the time to learn how to create and manage a spending plan, keep reading! Similarly, if you’ve budgeted in the past but have fallen out of the habit and would love to jump back into life with a budget again, you may find this super helpful.
With the right tools and information, building a budget can be quick and easy. Here’s how to create a simple and practical budget for the time-strapped consumer.
1. Review your income and expenses
Most budgeting plans recommend tracking income and expenses for three months. If you’re pressed for time, though, you can choose to look at one month and review your spending and income throughout this time. There’s no need to spend days working through this step, either. Simply review your checking account details and credit card statements to see where your money went and the amount of income that came in.
If you’ve budgeted in the past and you’re trying to get back into the game, you can pull up your old numbers and just adjust them to reflect your current financial reality.
2. Compare income and expenses
Hold up your two numbers from the previous step and see how they compare. If your income outweighs your expenses, you’re doing great! If it falls short, you’ll need to trim your expenses in the next step or look for ways to boost your income. Even if the numbers balance each other out, it’s a good idea to trim expenses anyway to leave some wiggle room in your budget and/or allow for extra savings.
3. Assign a dollar amount to every expense category
Next, review the ways you spend your money and assign a dollar amount to each category. Include fixed and fluctuating expenses as well as monthly savings.
Experts generally recommend setting a specific number for each expense, but if you’re pressed for time and you want to keep things simple, you can make your categories more broad. For example, instead of setting a separate category for groceries, work lunches and dining out, you can set a larger number for all monthly food expenses. This way, you’ll have fewer categories and an easier time tracking expenses. You will need to be more careful when spending money in each category throughout the month, but you’ll likely learn how to do this easily after a month or two of practice.
If your income does not cover your expenses or just barely covers them, look for ways to trim the fat in any way possible as you work through this step.
Jot down your dollar allocation on paper or create a digital version of your budget and upload it to your personal devices for easy access.
4. Use technology
Harness the power of technology to help you track and manage your expenses effectively. A budgeting app can make tracking your monthly spending super-easy. You can upload your budget to many apps and track expenses throughout the month. These apps will let you know how much you’ve spent in each category and warn you when you’re getting close to the limit.
Another great option is to see what resources your financial institution has to offer. Often they may have unique budgeting resources and partnerships with other apps or organizations offering free or discounted services to clients or members.
5. Live with your budget
You’re ready to live with a budget! Remember to keep your monthly expense categories in mind as you make purchases throughout the month and to track your spending.
If you find it too hard to keep track of your spending throughout the month, you can choose to use the money envelope system to make it easier. Simply withdraw cash amounts for each non-discretionary expense category in your budget at the start of the month, and only use the money in these envelopes to pay for these costs throughout the month. This way, there’s no need to remember how much you’ve spent in each category or to agonize over how much you have left to spend. When the envelope starts getting thin, you know you’re getting low on funds. And when the envelope is empty, it’s over for that category until the new month begins.
6. Review and adjust
Your budget is up and running! Review your spending plan regularly to see if it’s still working for you and your current financial circumstances. You’ll likely need to make adjustments as time goes on, but these should be quick to implement into a well-formulated budget.
Budgeting doesn’t have to take a lot of your time or be overly complicated. Use this guide to learn how to create a practical, easy budget that works.
Join Bay Federal Credit Union, the area’s largest local credit union, in celebrating Financial Capability Month. Financial capability ensures every individual has access to unbiased and trustworthy financial education and understanding of financial needs and services. Learn more today at https://www.bayfed.com/financialcapability or visit any of their 7 branches for a creativity contest and the chance to win up to $50.00.
About Bay Federal Credit Union
Bay Federal Credit Union is a full-service, not-for-profit financial institution that serves over 86,000 members and 2,400 local businesses throughout Santa Cruz, San Benito, and Monterey counties. With more than $1.6 billion in assets, Bay Federal is the largest member-owned financial institution in the region. The organization has been proudly serving its members and the community since 1957. Bay Federal is a certified Community Development Financial Institution, with a primary mission of promoting community development alongside their financial activities. Bay Federal has an award-winning employee volunteer program in which employees have given their own money and volunteer for numerous local schools, nonprofit organizations, and community events each year.
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