How to Create a Good Budget

The principles that make a good budget, something you can stick to:

Being Realistic: Being too strict is a recipe for failure.
Making Adjustments: A budget is not set in stone, but a fluid thing.
A Team Sport: If you live with a partner or spouse, you have to agree mutually on how to budget the financials.
Expect the Unexpected: Keep an emergency fund, ideally 3-6 months of necessary expenses.
Budgeting the Expected: Certain upcoming expenses need to be budgeted in advance, like property tax, holiday shopping, etc.

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5 Simple Steps to Creating a Budget That Actually Works

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As a general rule of thumb, we're taught to avoid spending more than we earn. Easier said than done, especially if you don't have a concrete plan in place. That's where a budget comes in. But creating a budget that you will actually stick to can prove to be challenging.

Key Ideas

Budgeting = creating a plan to spend your money

Budgeting is simply balancing your expenses with your income.

It's a plan for the coordination of resources and expenditures. When you budget your money, there’s a desir...

How to create a budget

Gather Some Financial Information: gather a detailed list of your income and expenses.
Select a Budgeting Method: figure out how you’ll budget your money to meet your most pressing financial goals.
Create Your Budget: tally up all your expenses and income to see where you stand and allocate expenses.
Execute Your Plan: you can use a notebook, pen and paper, a spreadsheet or an online software.
Reward Yourself: you can work a small percentage into your budget to treat yourself each month.

The 70:20:10 budgeting method

This method suggests that you allocate 70 percent of your income to expenses, 20 percent to savings, and the remaining 10 percent to debt.

70:20:10 may work for someone with a healthy emergency fund and minimal debt.

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Your 6-Step Guide to Making a Personal Budget

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A personal or household budget is an itemized summary of expected income and expenses for a defined period of time, typically one month. While the word budget is often associated with restricted spending, a budget should really mean more efficient spending.

Key Ideas

What a Budget Does

As a personal financial planning tool, a written, monthly budget allows you to plan for how you'll spend and/or save your money each month and also keep track of your spending patterns.

Make a Budget in 6 Simple Steps

Gather every financial statement you can (bank statements, investment accounts, recent utility bills).
Record all of your sources of income.
Create a list of monthly expenses.
Break expenses into 2 categories: fixed and variable.
Total your monthly income and monthly expenses.
Make adjustments to expenses: If you have accurately identified and listed all of your expenses, the ultimate goal would be to have your income and expense columns to be equal.

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How to Set Up a 50/20/30 Budget

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There are lots of different budgeting methods you can try to determine the best way to manage your money. But while budgeting guides might mention those methods or provide broad categories on which to focus, they don’t always make it easy to see how your budget will actually look.

Key Ideas

The 50/20/30 budgeting method

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With the 50/20/30 budgeting method:

50% of your monthly spending goes toward essentials - your home, your food, etc.
20% of your monthly spending ...

Debt payments

Debt payments may look confusing when you add it to the savings column. But the easiest way to build up a savings balance is not to have your money go toward debt. Once your debt is paid off, you can increase the savings.

Reducing your essentials

Play around with your monthly budget to see where you can reduce your monthly spending:

You could contact your internet company to get a discount.
You can clip coupons and use rebate apps to spend less on your monthly groceries.
You could set aside less for medical expenses if you have an emergency fund.