Build a budget in 4 simple steps

Building a thorough budget can make a huge difference in your finances. Budgeting helps have a clear picture of your finances, keeps you from overspending each month and, helps you save money long term.  

Steps for developing your budget:

1. Find out how much you have to spend 
   Before you budget, it’s important to know how much you’re able to spend each month. To begin, write down the monthly income you bring home after taxes and automatic deductions for retirement or insurance. If you’re a freelancer or a contractor, you’ll need to make an educated forecast based on the average of your past paychecks – but don’t forget to consider year-end taxes.
2. Add up necessary expenses 
   Not everything in your budget is negotiable. Most people need to spend money on things like rent, utilities and car payments. Jot down everything you absolutely have to spend money on and the monthly payments of each. Don’t include optional expenses such as cable television, entertainment or travel.  Subtract the necessary expenses from your monthly income, and move to the next step.
3. Budget your discretionary income 
   Discretionary income goes to any flexible expenses, such as groceries, dining out, cable television or savings. List spending categories next to the monthly amount you’re willing to spend. Once you’ve added everything in, make sure your monthly income covers it all. If it doesn’t, trim down unnecessary costs until you do.
4. Stick to your budget 
   Setting a budget is just the first step. Sticking to it is where the real work comes in. You can keep track of your budget manually or with the budgeting tool. Take a look at your budget every few days to see where you stand. If you’ve exceeded spending in one category, trim down spending in another. Be sure to take note of your final results each month and make any necessary adjustments.

You can do this! While it won’t always be easy, sticking to a budget will help you gain financial stability well into the future.