How can I set and stick to a budget?

Budgeting isn’t just about spending less, it’s an important tool for understanding your finances so you can make better informed choices.

Plan your budget step by step.

Budgeting seems complicated. Where do I start?

As with any complicated job, it’s best to break it down into more manageable parts. Start by writing down your income and expenses. How do they compare? Divide your expenses into smaller categories, such as essential and discretionary spending. Those categories can be further broken down into housing, transportation, entertainment, etc.

How do I keep track of my spending?

There are several ways. One is to make purchases with a debit or credit card and use your monthly statements to review your purchases. If you use cash, keep your receipts. Be sure you account for less frequent expenses, such as year-end taxes. Understanding where your money goes is an important first step to making better choices.

What can I do to control my spending?

Often it’s incidental purchases that make it difficult to meet your budgeting goals, and even small expenses can add up over the course of a month. Consider simple strategies — such as grocery shopping with a list, limiting the number of times you eat out, and avoiding recreational shopping and impulse purchases — to help control spending.

How do I set goals for my budgeting?

While spending less than you make each month is a good start, you also need to consider what your financial goals are and what it will take to reach them. This will help you figure out how much you need to be saving each month. It’s easier to make sacrifices when you know what you’re making them for.

How do I budget for unexpected expenses?

Sometimes circumstances beyond your control can undermine your budgeting efforts. The best way to protect yourself is to have a fund set aside for emergency expenses. This can keep you from having to borrow money that can place an additional burden on your finances and make it more difficult to live within your budget.

Now that I’m saving money through budgeting, what do I do with the money?

Examining your goals can help you determine how much you need to save, and it can help you determine what to do with the money you save. In most cases, you’ll want to move what you save from your checking account to a separate fund — a savings account, for example — so that you can earn interest on it and you’ll be less tempted to spend it.

What if my financial circumstances change?

Budgeting is a dynamic process that requires periodic reassessment, especially as your finances change. Over time, goals are achieved, new goals arise, and longer-term goals become short-term. Your income and expenses can change, too, requiring adjustments to your budget.

Money Notes

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Additional Resources

• • Budget Calculator
• • Living_Expenses