It can be overwhelming to manage all your expenses and income without a dedicated plan. Creating and following a budget allows you to spend money with confidence without losing track of your financial goals. Follow these steps to develop and maintain a budget that aligns with your lifestyle and financial plans.

Track your spending

The first step to creating a budget is understanding where your money is going. Take notes on all your monthly payments – everything from your gym membership to your housing payments to the coffee you buy every morning. An easy way to double check you’re not missing any daily expenses is by checking your credit or debit card transaction history or using a budgeting app to automatically track your spending. Once you have an idea of your spending each month, organize your transactions into categories such as housing, food, transportation, bills and utilities, health and personal care, entertainment, shopping, taxes and fees, savings and investments and debt repayment.

Separate needs and wants

Now, you have an idea of how much money you spend in a month and where that money is going. From here, separate your spending categories into needs and wants. Food and housing would be needs, and shopping and entertainment expenses would be wants, for example. Be aware that there is overlap between these categories. For example, shopping for groceries may be essential, but shopping for fashion apparel likely isn’t.

Know your variable and fixed expenses

Make sure you determine which expenses are variable, like your entertainment spending, and which are fixed, like your housing payments. Take an estimate of your average monthly variable expenses to maintain an accurate idea of how much you are spending, even if it changes month-to-month. If you do need to reduce spending, it is often easiest to cut from your variable spending categories.

Determine your income

Look at your monthly income and see how it compares to your monthly spending. Hopefully, you are spending less than you are earning, but if you’re not, examine your spending on wants and see where you can cut back. There may also be ways to reduce the cost of your debts, such as refinancing a mortgage to obtain a lower payment or to take equity out to pay off high-interest loans and credit card balances.

Set your goals and begin to budget

Write down your financial goals, including both your short- and long-term goals. Long-term goals might be building a retirement fund or paying off debt, and short-term goals might be saving for a vacation or another big purchase. Then, allocate how much of your income you want to dedicate to each of your categories, and begin budgeting. If you’re lost, the 50/20/30 plan is a good place to start. In this budget, 50% of income goes to needs, 20% goes to debt repayment and savings and 30% goes to wants. These ratios can be adjusted to suit your situation.

Stick to it

The most important part of a budget is sticking to it! It can be easy to give in to unbudgeted spending, so remind yourself of your goals and the reasons that you are following your budget. However, don’t be afraid to tweak parts of your budget if and when needed. Sometimes, situations may arise that require you to reallocate some of your spending, and that’s OK too.


With your budget in place, you should be on the road to achieving your financial goals while feeling knowledgeable and confident about your spending!