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What comes to mind when you hear the word “budget”? If you’re like many people, you think of stress, restriction, and doing without. But it doesn’t have to be that way! A budget is a tool to simply keep your finances on track so you can have more, not less, and avoid stress when bills are due. But how do you make a budget and stick to it? It’s easy – follow a few simple steps and you’ll be well on your way to financial freedom!

What is a budget?

A budget is simply how much you can spend in certain areas like bills, food, transportation, shopping, and more. Your budget will be unique to you and your lifestyle. If you never eat in restaurants, you can probably ignore the ‘Dining Out’ section of your budget. You will, however, need to set a grocery budget to make sure you’re not spending too much on all your home-cooked dinners.


How do I create a budget?

Start with creating a list of everything you spend money on. We mean everything. This might take a while, as it’s common to have small, one-off purchases you forget about. Commonly forgotten purchases include your morning coffee, subscription services, getting gas for your car, or tolls and parking fees. But once you know where your money is going, you can see where your spending can be adjusted to better fit your needs. 

Next, add up your non-negotiable expenses – that’s rent or a mortgage, car payment and insurance, food, utilities, and other bills you absolutely have to pay (don’t forget credit cards or student loans). This can be painful – bills are expensive! But once you know how much to subtract from your income for non-negotiables, it gets better. Now you can divide up your fun money! 

Whether you love takeout, buying new clothes, or your latte every morning, we all have different priorities when it comes to our money. Figure out what you need (not just want) the most, and budget for it. This may mean you have to spend less on something else! If you could spend whatever you wanted on all the things you like, you wouldn’t need a budget (and we’d want to know your secret!). But for most people, that’s not feasible. Decide on a dollar amount to spend on “fun” things like entertainment and shopping and stick to it. Be careful: going over in this area is easy and common, and it’s the top reason you may be tight on funds when it’s time to pay bills.

How do I stick to a budget?

Like most things – with practice! At first, it’ll likely be hard to remember what you’re supposed to spend, and you may break your budgets from time to time. That’s normal. When you realize you’ve overspent, you’ll have to even it out in another area of your budget. If you budgeted $50 for shopping but spent $60, you’ll need to lower your budget for restaurants or coffee by $10. Unfortunately, you cannot lower a budget in the Bills category – those are fixed costs and paying less than the amount due usually comes with consequences, like late fees or dings to your credit score.

But remember to not be too hard on yourself – no one said getting your finances in order was easy! With practice and close attention, you’ll get used to your spending limits and will feel at ease knowing you’ll have enough money to last you until the next payday. Now get budgeting!