How to Create a Budget and Stick to It

A budget is simply a plan for managing your money based on your income and expenses. It can help with tracking where your money goes and may help you make more intentional decisions about spending and saving. While budgeting requires discipline, it can be a powerful tool to help you reach your financial goals.

Here’s a step-by-step guide to budgeting for the first time—and making it a lasting habit.

1. Define Your Financial Goals

Before you start crunching numbers, take a moment to think about what you want to achieve. Are you saving for a dream vacation, a down payment on a house, or paying off debt? Maybe you just want more financial flexibility each month.

Setting clear goals can give your budget purpose and motivation. Consider creating a vision board or keeping a reminder of your goal where you do your budgeting to stay inspired.

Even if you don’t have a specific goal in mind yet, taking control of your money is always a smart move. Once you do set a goal, you’ll already have a solid financial foundation.

2. Track Your Spending

To build an effective budget, you first need to understand where your money is going. There are plenty of free budgeting apps and spreadsheets available—choose one that works best for you. Track your income and categorize your spending, including housing, transportation, food, entertainment, and other monthly expenses.

3. Calculate Your Income

If you have a steady paycheck, add up your monthly take-home pay after taxes and deductions. If your income fluctuates, base your budget on the lowest amount you typically earn. For example, if your take-home pay varies between $2,500 and $5,000, plan your budget as if you’re making $2,500. Any extra income can go toward savings or other financial priorities.

If you're self-employed or work as an independent contractor, remember to set aside money for taxes, since they aren’t deducted automatically from your earnings.

4. List Your Monthly Expenses

For a budget to be useful, it should be accurate. Make sure you account for all your expenses, from rent and groceries to streaming subscriptions and small daily purchases. If you use cash often, keep receipts to track spending. Review your bank and credit card statements to ensure nothing is overlooked.

If you use peer-to-peer payment apps like Venmo, Zelle, or CashApp, track those transactions too, as they can add up quickly.

5. Choose a Budgeting Method

Once you’ve listed your expenses, categorize them into essential costs, savings, and discretionary spending. A helpful guideline is the 50/15/5 rule:

●      50% for necessities: Rent/mortgage, utilities, groceries, and debt payments

●      15% for retirement savings: This includes contributions to a 401(k), IRA, or other retirement accounts

●      5% for short-term savings: Emergency fund, unexpected expenses, or future purchases

If you’re not in a position to meet these percentages right away, don’t worry. The key is to start where you can and work toward these goals over time.

6. Be Flexible and Realistic

A budget is meant to guide you, not restrict you completely. Avoid setting unrealistic spending limits that could lead to frustration. If your goal is to cut back on dining out, for example, instead of slashing your budget in half immediately, try reducing it by $100 per month until you reach your target. Small, gradual changes can be easier to maintain.

7. Make Budgeting a Habit

Consistency is key. When starting out, track your expenses weekly to stay on top of your budget. Over time, you can shift to a monthly review. Setting a recurring reminder in your calendar can help you stay accountable.

A budget isn’t just about cutting back—it’s about creating financial stability and freedom. As you reach milestones, reward yourself with something small and meaningful—just make sure it fits into your budget!

By following these steps, you’ll be better able to build a budget that works for you and helps you achieve your financial goals over time.

Sources:

https://www.fidelity.com/learning-center/smart-money/how-to-budget

Disclosures:

This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.

This material is provided as a courtesy and for educational purposes only.

These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.