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Fulton Bank

How to create (and stick to) a budget

You know you need a budget. But do you know why? A budget is an opportunity to help you gain more control over your finances.  Creating and sticking to a budget can help you:

  • Give you clarity on your monthly expenses.
  • Pinpoint areas where you may be overspending.
  • Help you tailor spending to your income, so you live within your means.
  • Find the money you need to work towards financial goals, such as saving for a vacation or new car.

Essentially, a budget helps you manage your money - it provides you with all the details of your finances each month. The good news is that creating a budget is something that anyone can learn, and with a little bit of practice, succeed at. Here's how to do it.

3 steps to creating a budget

There are two basic components to a budget: your income and your expenses.  

1. Add up your monthly income. That includes money you earn from your job, cash you might have coming in from a side hustle or freelance gig, and any other money you receive regularly.

2. The next step is adding up your expenses. Start with your everyday expenses, which are the ones you pay every month. That includes:

  • Your rent or mortgage payment
  • Utility bills, including cell phone and internet services
  • Insurance premiums
  • Recurring subscriptions, think about streaming (music or tv) or meal delivery services
  • Debt payments, including credit card payments, student loan or car payments
For fixed expenses that fluctuate like your electric bill or that are paid quarterly (insurance premiums), add up the annual cost, then divide by 12 and use that number for your monthly expense breakdown. 

Then, add up your variable expenses. These are ones that can change over time as you spend more or less, such as:

  • Groceries
  • Entertainment and dining out
  • Clothing
  • Hobbies or recreation
  • Gas and car maintenance
  • Gifts
  • Travel

Revisit your bank and credit card statements to get an accurate view of your variable expenses each month. There are plenty of apps that can make this easier; you simply link them to your checking and credit card accounts and the app does the rest. Another option is to use tools often available through online and mobile banking.  Check out Money Management, it allows you to easily view, organize, and manage all your accounts (even external ones). Either way, tracking your expenses can help you shape your budget more accurately.

3. The final step is simple. Add your fixed and variable expenses together, then subtract the total from your monthly income. Ideally, you have money left over. But if you don't, you'll need to review each of your expenses to see if there's anything you can trim or even eliminate to bring your spending in line with your income.

Things to think about:

You may be able to get a better deal on car insurance by switching carriers or increasing your deductible.

Cutting out your gym membership and exercising at home is another way to put money back into your budget.

Eating at home and planning your meals can help you save at the grocery store if you shop with a list and only buy what you need.

Make saving part of your budget

Saving is an often-overlooked part of budgeting, but you can't leave it out. No matter how carefully you plan your spending, there may be unexpected expenses you have to deal with from time to time. Your car breaks down, or your dog needs an unscheduled visit to the vet — savings helps you cover those expenses without having to use a credit card or loan.

The best way to build emergency savings is by including it as a line item on your budget. When you treat savings like a fixed expense, it's much easier to get into and stick with the habit.

How much you should save depends largely on what your budget allows. This is why it's so important to review your expenses to see if there's anything you can reduce. The more money you can free up, the more you can add to savings.

Even if you're starting small, say with $10 a week, the most important thing is to be consistent. Automate your savings with regular transfers every payday. And consider automating your bill payments as well. It's a hands-off way to keep your budget on track and grow your savings steadily.

Follow your budget plan

A budget only works when you stick with it. These tips can help you stay on track:

  • Impose a 24- or 48-hour waiting period for new purchases to curb impulse buys
  • Consider switching to cash or debit-only and leaving your credit card at home so you're not tempted to overspend
  • Budget a small amount for "fun" each month
  • Use a budgeting app to track your expenses everywhere you go
  • Let friends and family know you're on a budget, and get a budget accountability partner who can offer motivation and advice
  • Celebrate your budgeting and saving wins

Most importantly, review your budget each month to make sure it's realistic. Your spending or income may change over time, so make sure your budget evolves as well. Sticking to a budget can be challenging, but once it becomes a habit, the rewards will be worth it.