How to Create a Simple Budget That Works for You

Happy New Year! As you start 2020, many of us are thinking about fresh starts, new goals, and, importantly, our finances. A solid budget isn’t about restriction; it’s about empowerment – giving you control over your money and helping you make informed decisions. It can feel daunting, but creating a simple budget doesn’t have to be complicated. This guide will walk you through a straightforward process that works.

Step 1: Track Your Spending (The Foundation)

Before you can create a budget, you need to understand where your money is going. For at least one month (ideally longer), track every single expense. Don't just think about big bills; include everything from coffee to your monthly subscription services. Here are a few ways to track your spending:

Spreadsheet: Create a simple spreadsheet (Google Sheets or Excel) with columns for date, item, category, and amount.
Budgeting Apps: Numerous apps like Mint, YNAB (You Need a Budget), EveryDollar, and PocketGuard can automatically track your spending by linking to your bank accounts and credit cards.
Notebook & Pen: The old-fashioned method still works! Keep a small notebook and jot down every purchase.

Step 2: Categorize Your Expenses

Once you`ve tracked your spending, group your expenses into categories. Common categories include:

Housing: Rent/Mortgage, Utilities (electricity, water, gas), Property Taxes
Transportation: Car payments, Gas, Insurance, Public Transport
Food: Groceries, Eating Out
Entertainment: Movies, Concerts, Hobbies
Debt Payments: Credit Cards, Loans
Savings: Emergency Fund, Retirement, Other Goals
Miscellaneous: Clothing, Personal Care, Gifts

Step 3: Determine Your Income

Calculate your total monthly income after taxes and deductions. This is what you’ll be working with. Be realistic - don’t overestimate your income.

Step 4: Create Your Budget

Now it's time to allocate your income to your categories. There are a few budgeting methods you can use:

50/30/20 Rule: 50% of your income goes to Needs (housing, food, utilities), 30% goes to Wants (entertainment, dining out), and 20% goes to Savings and Debt Repayment.
Zero-Based Budgeting: Every dollar is assigned a purpose – your income minus your expenses equals zero. This method forces you to be very intentional with your spending.

Step 5: Review and Adjust Regularly

Your budget isn't set in stone. Review your budget at least once a month (more frequently if needed) to see how you're doing. Are you overspending in certain categories? Do you need to adjust your priorities? Life happens, so be prepared to make changes as needed.

Resources to Help You:

Investopedia: https://www.investopedia.com/ - A great resource for learning about personal finance.
NerdWallet: https://www.nerdwallet.com/ - Offers budgeting tools and advice.

Starting a budget is a crucial step towards financial well-being. With a little effort and discipline, you can take control of your finances and achieve your goals in 2020!