Budgeting 101: How to Create a Budget | All & About

Making a budget and sticking to it is important to a strong financial future and can help you achieve your financial goals. In fact, creating a budget can reduce stress and improve your health because it allows you to take control of your life.

Best practices are those methods that have, over time, been shown to work the best and be the most efficient. In terms of creating and maintaining an effective monthly budget, designing it upfront can help guide your spending.

Try using the 50/30/20 rule which says that you should devote 50 percent of your income to needs, such as rent or mortgage, food, car payment and gas, minimum payments on debt, and other things that are necessary for your health, safety, and survival.

Then put 30 percent toward wants, such as Netflix, a new handbag, movies, and the cost of upgrades such as choosing a BMW instead of a Toyota. The last 20 percent is saved in an emergency fund, another investment account, or used to make extra payments on outstanding debt.

Once you have a budget framework, use the following ideas to help you get the most out of your budget:

Have defined goals for your budget (which helps to reach them faster) such as saving up a home down payment or paying off a credit card.
Pay yourself first by moving money into savings.
Identify your needed expenses and overestimate them to build a small cushion.
Find an app or software that’s easy to access quickly and straightforward to use.

Track your actual spending each month and see how it compares to budget, then adjust your spending as needed.
Allow yourself a set amount of spending money each week.
Plan meals ahead and write a shopping list before you go to the store to avoid impulse buys.
Allow for treats occasionally! Everyone needs a break and this helps avoid becoming resentful about your budget.