Why do I need a budget? 

A budget is a plan for your money to help you achieve your financial goals. Whether you are trying to make ends meet, save for a house, pay off a credit card, or just set aside money for a fun activity a budget can help you. That act of making and maintaining a budget will help you accurately assess your financial situation. With this information, you can take control or your money and direct it to the areas that will make the most impact for your financial situation.

5 steps to create an effective budget (So you can make your dreams happen!)

Step One: Set your goals
Identifying your financial objectives is important. These could be paying off debt, putting money aside for a significant purchase, creating an emergency fund, or simply living within your means. Understanding what your goals are will assist you in creating a budget that works for you. (Need help deciding your financial goals? Create a Personal Financial Statement first – click here)

Step Two: Calculate your monthly income
You need to write down how much money you make each month. Any bonuses, commissions or tips, as well as any other sources of income are included. This will give you an idea of how much money you have to work with each month.

Step Three: Determine your expenses
Write down what you spend money on each month. It’s helpful to break your expenses into categories such as mortgage or rent, utilities, transportation, food, entertainment, memberships, credit card payments and any other monthly bills or expenses you have.  

Step Four: Assess and strategize
Now subtract your total monthly expenses from your total monthly income.  Whether you have money “left over” or not, this is the moment where you start to strategize where you want your money to go. Your strategy may include prioritizing your expenses, identifying places where you could cut costs, and setting aside funds each month towards your financial goals.

Step Five: Follow your strategy
You’ve created a plan for your specific monetary situation and goals. Continue to update your budget monthly. This means recording your monthly income and expenses and making necessary adjustments to stay on track with your financial goals. By jotting down your success, you can identify areas where you may need to adjust your expenditures or uncover tactics to increase your revenue.

Making a budget is an important step in getting control of your finances. Whether you are saving for a downpayment on a house, or just getting your money in check, starting a budget is a simple way of getting your finances in check.

Check out a sample budget worksheet here: NB Budget pdf.

Learn more about how to make the most of your finances here: View Our Blog

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