Budgeting may not be the most glamorous task on your to-do list, but it certainly is one of the most important. That’s because budgets impact every part of your financial life, from how much you can save for a paradise vacation to your ability to pay off mounting debt.

If you would like to budget better but don’t know where to start, keep reading because we’ve created an easy budgeting roadmap anyone can follow.

List your income

Knowing what you’re working with is the first step of budgeting, so listing all your income is key. This includes your household’s regular paychecks and any extra cash you make from part-time jobs, garage sales, freelance work, etc.

Track your spending

Now that you’ve totaled your income and know what you’re working with, it’s time to evaluate your spending. List your expenses, starting with essentials: food, utilities, shelter and transportation, insurance, and debt payments.

Once you have that figure, tally up unnecessary costs. This is your personal spending on entertainment, eating out, shopping, streaming services, etc. Some expenses are one-time, spontaneous purchases, so you’ll want to average these costs over at least three months.

Additional Resource

Personal Spending Worksheet

Provided by the Consumer Finance Protection Bureau

Set your goal

With that completed, it’s time to set your goal based on the amount of money coming in and going out. Don’t overdo it with goal setting. While it’s great to have grandiose ambitions, it’s important to include short, achievable goals as well. That’s because you will be more likely to keep to your goals if you see progress.

Focus on your why and build your budget with that as your priority. For example, is your goal to pay off student loans, but your spending assessment shows you’re spending too much on gaming? It may be time to cut down on personal expenses. On the contrary, is your goal to have more money left over for entertainment and going out? Then you may need to reassess your insurance rate, rental costs, and salary requirements. This will help you focus on the big picture and create tangible steps to help you achieve it.

Lean on what’s proven to work

A common budgeting breakdown is called the 50/30/20 budget. With this budget, you will aim to spend roughly 50% of your after-tax dollars on necessities, no more than 30% on wants, and at least 20% on savings and debt repayment.

Over the long term, someone who follows these guidelines will have manageable debt, room to indulge occasionally, and savings to pay irregular or unexpected expenses and retire comfortably.

Monitor progress

Checking your progress is crucial. Research has shown that frequent monitoring often leads to a higher goal success rate. As you track your progress, think about how you can tighten spending or maybe even pick up extra income to achieve your goals faster. Consider canceling unused subscriptions or old recurring charges for services you don’t need.

Budgeting is a marathon, so don’t forget to celebrate the small wins. When you reach a savings or debt reduction goal, treat yourself to a modest reward, like some ice cream or a new album you’ve had your eye on.

When possible, utilize helpful resources and tools at your disposal to make budget tracking easier, such as FirstBank’s Money Manager tool. This free resource can help you understand your unique spending patterns, create a budget accordingly and monitor your progress.  

Check out our Money Manager Overview video below to see how it can work for you:

Adjust accordingly

As your goals evolve and new needs emerge, remember to adjust your budget accordingly. When you need to cut back, review your want-to-have expenses first. If you’ve already changed your spending on wants, evaluate your spending on needs.

Few elements of your budget are set in stone: you may get a raise, your expenses may increase, or you may have reached your goal and have created new ones. Whatever the reason, keep checking in with your budget following the steps above.

Planning for every dollar you have can help you better understand your financial freedom today and help you make it grow in the future.

Disclosures

Balances and transactions within Money Manager are not displayed in real-time. Real-time balance and transaction information is provided on the Accounts pages within the Online Banking services outside of Money Manager.

Online Banking is required to use Money Manager.  Online Banking is free with eStatements and $3.00 per month with mailed statements

Money Manager is only available in the FirstBank Mobile App.

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