Budgeting, Bills, and Savings

Jul 15, 2021

Creating a monthly budget doesn’t have to be complicated. At its core, it boils down to basic math—you take your total income and subtract your total expenses. As long as you’re in the positive on that equation, you’re in good shape. The following six steps can help you budget smarter and plan for financial success.

Step 1: Monthly income

Calculate your monthly net income. This is your take-home money after taxes, retirement contributions, incentives, and any bonuses you may have.

Step 2: Essential monthly expenses

List out your essential expenses. Start a spreadsheet and apply a monthly cost to your family’s necessities, which may include the following:

Rent or mortgage payments
Car payments
Car insurance
Renter or homeowner’s insurance
Utilities like gas, water, and electricity
Mobile phone and data plan
Student loan payments
Basic food and fuel

Step 3: Do the math

Now that you have your total net income and the cost of your basic necessities, some simple subtraction will tell you the key number—it’s your net cash flow. Hopefully you’re in the positive, because there are still some significant costs to account for.

Step 4: Factor in other costs

Tracking expenses month-to-month (and including variable costs, like food and fuel) is a great start. But don’t forget to factor in one-time or annual expenses that might otherwise throw a wrench in things. This could include things like property tax, car registration, upgraded military uniforms, back-to-school expenses for the kids, car or home maintenance, or vet bills.

Step 5: Cut your expenses

Look for cost-cutting opportunities. This could be anything from trips to Starbucks to meal planning, bulk purchases, or discontinuing subscription-based services you rarely use.

Step 6: Plan ahead and save

Finally, ask yourself this question: if you were to get hit with an unexpected expense right now, how would you pay for it? Financial experts will tell you that you need to save enough to cover at least six months of expenses. Every little bit you can put into savings or investments will help.

By putting these steps into place, you and your family can increase your financial stability and will be more prepared to face any emergencies. It takes time to save money and reach your financial goals, but you can start small by making a budget and a plan, and soon you’ll be increasing your savings and setting your finances up for success.