A fundamental step to financial health is spending less than you make, and it all starts with a budget. Budgeting can be the magical answer to lots of money puzzles, whether you’re saving for an important life event or wanting stop living paycheck to paycheck.
Here are some simple budget ideas that you can do right now! You can find lots of free budget templates online like this one.
How to Get Started
Step 1: Set Your Goals
A helpful first step to creating a budget is mapping out your life goals, whether they’re big or small. Long-term goals may include attending school, buying a car or house, or planning a wedding.
Your short-term goals could be goals you want to have in the interim, such as saving $1,000 in six months or planning a mini-getaway. Let your goals motivate you and guide your decision-making as you build your budget.
Step 2: Calculate Your Monthly Income
Before you can create a budget, you should calculate your approximate income each month. Your income could be from a full- or part-time job, side hustles, alimony — be sure to include any way that you actively receive money.
There are many ways to make extra money if you want to increase your income. Drive for a rideshare app, become a dog walker or nanny, or even reach out to people in your community to see how you can help them in exchange for payment. Check out more money-making ideas here.
Step 3: Write Down Your Monthly Expenses
Once you know how much money is coming in, your next (maybe not-so-fun) task is to figure out how many bills and expenses you have. This includes rent, utilities, student loan or credit card debt, daycare costs, and anything else that is a fixed monthly charge. Don’t forget to account for the variable items as well, like grocery bills, entertainment, clothes, and other miscellaneous expenses.
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Step 4: Allocate Your Money in a Monthly Budget
You know how much you’re making, and you know how much you must spend on expenses. Now, the fun (really!) part of budgeting can begin: Portioning out your income for your expenses to the essentials and (hopefully) having some left to save at the end!
How much should you allot to each category of your budget? One way to go is the 50/30/20 rule, which is a percentage-based guideline to allot 50% of income toward needs (housing, bills, groceries, debt), 30% toward wants (entertainment or shopping), and 20% into savings. You may need to adjust your percentages based on your income. The key is to cut from the non-essential “wants” category whenever possible!
If you make $3,000 a month, your monthly budget might look something like this:
- Housing (rent, utilities, insurance): $1,300
- Essential Living Expenses (food & groceries): $400
- Debt Payments: $200
- Transportation (gas, commute, car upkeep): $300
- Non-Essential Living Expenses (entertainment & shopping): $300
- Savings: $500
Do you find that your expenses add up to more than your income? You’re not alone.
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Here are a few other ways you might consider cutting back on expenses:
- Kicking bad habits can also give you more money for other areas of your budget!
- Try eating out less and cooking at home more.
- Limit your nights out with friends, and choose happy hours where drinks are much less compared to on a busy Saturday night.
- Spend on less on rent by getting a roommate or moving further from the city? Check Diggz or another roommate-matching service for help.
- Resist the lure of the drive-through and pack lunches from home to save big.
Step 5: Stay on Track
Now that you’ve created your budget, it’s time to stick to it! Budgeting is all about making smart choices (and little sacrifices) so you can save and give your future self everything you wanted and more.
Keep your list of goals with you to remind you of things you want in the long run. This can help curb the urge to buy a really cute shirt that you don’t need or prevent you from buying a ticket to a concert that’s way out of your price range. (Lizzo will understand!)
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Your Financially Bright Future
MoneyLion is here to help you take control of your money and bolster your financial success. You have the power to take control of your financial health. It won’t happen overnight, but use the resources and tools MoneyLion offers so your future is brighter than ever.