How to Make a Budget – and Stick to It


Many Americans spend beyond their means every month. They may think, "Why make a budget if I can't stick to it, anyway?" But the truth is, a realistic budget can help you control spending so that you build a good cushion of savings.

Smart budgeting can also help you pay your bills on time, secure funds for an emergency, pay for college, buy that new TV and even have some fun!

Budgeting fast facts:

  • A monthly budget can help you stay out of debt and start saving
  • You can find lots of free online tools to help you make and keep a budget
  • Keeping your big financial goals in mind gives you more motivation to save

How to create a budget

It seems so simple: it's money in minus money out, right? But you'd be amazed at how many people forget to factor in all their expenses. That daily $5 grab-and-go breakfast adds up to more than $100 a month! So it's important to account for all your expenses.

One way to budget is to keep track of every penny you spend for a couple of months and then use that as a guide. Keep your receipts and periodically log them, along with transactions on your bank statement. Create a spreadsheet or write down your budget on paper.

First, list all your sources of income, including:

  • Wages, salary, tips and bonuses
  • Dividends and interest income
  • Refunds and reimbursements
  • Alimony
  • Child support
  • Disability
  • Gifts

Next, list all your expenses. Then make a list of everything that falls into each category. Here are the main categories to list as expenses:

  • Rent or mortgage
  • Utilities (electricity, gas, water)
  • Internet and/or cable service
  • Groceries
  • Household expenses (supplies, laundry)
  • Clothing
  • Insurance
  • Health care and medication
  • Transportation
  • Children's expenses
  • Education
  • Pet care
  • Memberships and subscriptions
  • Restaurants and entertainment
  • Gifts
  • Charitable donations
  • Loan or credit card payments
  • Savings and investments

Each month, add up your income and expenses, and subtract your total expenses from your total income. This is the amount you have left over to put into savings. To increase your savings each month, see if there are things you could cut back on or even live without (that $5 grab-and-go breakfast, maybe?). It can be very satisfying to be frugal and watch your savings grow.

For many more budgeting tips, search the Internet for "living on a budget" or "budget hacks."

Get tips on how to make a budget. Living on a budget can help you create a savings cushion for emergencies or taking a vacation.

How to maintain a budget

Different strategies work for different people, but here are a few budgeting tips that might work for you:

  • Always consider the big picture before making a purchase. You might want those new shoes, but isn't saving for a down payment on a house or building up an emergency cushion more important?
  • Pay cash whenever you can. It's interest-free and makes every purchase feel more real.
  • Pack your lunch whenever possible. It's cheaper and often healthier than dining out. And drink the free coffee provided by your company!
  • Find cheap or free ways to have fun. Go to the park or beach, throw a potluck or rent a movie.
  • When you need to make a larger purchase, take advantage of 0% APR offers. Finish making payments within the promo period to get the best deal.