Do you get stressed about money towards the end of the month? Is looking at your bank account statements surprising sometimes? That might mean it’s time to set a budget. A well-designed budget can help you determine which areas of spending you need to cut back on, how much you can realistically expect to save each month, and how closely you're sticking to your personal finance goals. And don’t worry, you can learn to make your own budget in only 5 easy steps:
1. Calculate your income
Whether you work one job or multiple jobs, add up all your sources of income for the month. If you share finances with your partner, add their income to your total to see how much you bring in as a household.
2. Add up your bills
Next, add up all of your fixed monthly expenses. This includes rent or mortgage payments, utilities, your phone bill, car insurance, internet bill, etc. Also try to think of a reasonable number that should be added to account for miscellaneous and unexpected expenses, like car repairs, doctor visits, birthday gifts, school expenses, eating out, entertainment, etc.
3. Leave yourself a cushion
After you've arrived at your total monthly expenses, add between 10 to 15% to the sum of your expenses to give yourself a margin of error, just in case something major comes up.
4. Set spending goals
Now you have 2 bottom line numbers: your total income, and your total expenses. You should also have your expenses segmented into categories. With those figures in hand, it's time to take a hard look at your budget and set some saving and spending goals.
For example, do you spend a lot of money eating out every month? Could you try reducing that expense by 25%? Does your phone bill surprise you every month? Could you switch to a less expensive plan, or see if there are new deals out there? Whatever goals you set for yourself, be sure to document them for future reference and try to stick to them.
5. Track your progress
With your new budget in mind, you can now track your progress throughout the month. Are you meeting your goals? Are you falling back into old spending habits? Do you need to adjust your goals to be more realistic? Are some spending categories consistently surprising? Whether it’s wins or losses, track your progress and keep going, adjusting, and budgeting into next month.
We know it might be hard to meet your budget goals that first month, but practice makes perfect. Stick with it, give yourself realistic expectations, and you’ll start reaching more and more personal financial goals as the months go by. When you use your GO2bank mobile account while planning your monthly budget, you’re sure to save and build a better financial outlook. Learn more about how you can use GO2bank’s mobile bank account to help track spending and take control of your financial journey.
The views and opinions expressed here may not represent the views and opinions of GO2bank, Green Dot Corporation, or its affiliates. It is presented for general informational purposes only and does not constitute tax, legal, or business advice.