How to Create a Useful Budget

calculator with spreadsheet and pen

Budgets are a tricky subject for a lot of us. On the one hand, they can be difficult to follow, especially if you set a budget that’s too strict. But on the other hand, they really are the only practical way to get control over your spending to make sure you’re using your money the way you want to.

These three key steps will go a long way in helping you develop a practical, workable budget:

  1. Keep track of how you save and spend.

    One of the best and easiest ways to track your spending is by using a software program. With just a few clicks, you can review everything you’ve earned and spent. The more you use the program and the more transactions you enter, the more updated information you’ll have at your fingertips to review later. Of course, if you prefer to track your spending manually, there’s nothing wrong with saving receipts and writing down your spending and savings on paper.
  2. Write down your savings goals.

    Once you’ve started tracking how much you spend and how much you’re saving, it’s time to figure out your financial goals.
    • Do you want to buy a home in X number of years?
    • Do you want to own a new car by the end of the year?
    • Are there home improvements you’d like to have done soon?
    • Do you want to set money aside each month for you children’s education?
    • Are you putting enough money into retirement investments?

    While you’re thinking about your goals, you should also factor in unexpected expenses that could come up. Create an emergency fund for things like a major medical issue or unexpected car problems.

  3. Compare your spending to your goals.

  4. It’s a good idea to monitor your budget on a monthly basis. If you have a spouse or significant other, work on this step together. Are you on track with the financial goals you’ve established? Do you need to make more cuts? Were things purchased that were not budgeted for?

Sitting down to discuss your spending habits and goals is the best way to keep your budget top-of-mind. You may find that your budget can use some adjustment — it may be too stringent in one area and not strict enough in another. It’s helpful to talk about modifying the budget where needed and committing to making it work.

Taking control of your finances to create a budget may seem a little intimidating at first, but by taking things one step at a time, you’ll start to eliminate financial worries and have more enjoyment in your life.