Budgeting 101: How to Get Started in 5 Steps – Business Insider
- A budget can help you stay on top of expenses, pay off debts, and achieve your financial goals.
- There are several strategies for budgeting. Each has its own unique pros and cons.
- Checking in on your budget, adjusting it, and analyzing your spending habits regularly is critical.
- Read more stories from Personal Finance Insider.
A budget is, at its simplest, a plan for how you’ll spend your earnings. It ensures you have the funds to cover your essentials — like housing, groceries, utilities, and your monthly debt payments — while also working toward other financial goals.
In short: Budgets allow you to get the most out of your paycheck. Without one, there’s a chance you could run out of money before your next pay date.
How to budget your money
Budgeting is critical if you want to stay on top of bills, pay off debts, or save for the future, and there are several ways to go about it.
“Building a budget doesn’t have to be overly complicated or time-consuming,” says Brittany Castro, in-house certified financial planner for Mint. “It’s actually the first step in putting yourself in control of your finances because it means you know where your money goes each month.”
Here’s how to get started with your budget:
1. Examine your income
To start budgeting, you first need a good pulse on your monthly income — more specifically, how much you take home each after taxes. If you’re unsure what your after-tax income looks like off the top of your head, you can typically use pay stubs or bank statements to get these numbers.
Once you have your income estimated, you’ll also need to estimate your monthly expenses — things like your rent or mortgage, utility costs, groceries, insurance, and gas. If you have debts (credit cards, car loans, etc.), add these in as well. Then, compare the two numbers,
“If your expected expenses are greater than your expected income, you will need to earn additional income, cut out some purchases, go into debt, or do a combination of these three,” says Todd Christensen, an accredited financial counselor and education manager at Money Fit.
If your income outweighs your expenses, though, that means you have extra cash to put in savings or toward some other financial goal you might have.
Quick tip: If you have a spouse or partner sharing financial responsibilities with you in the household, you’ll need to know their monthly income and expenses as well. Work …….
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