The Basics of Building Your Budget

Does this sound familiar: 

You swear you are going to save a specific amount of money by a certain date but then something always comes up. Next thing you know, you are pulling money out of your savings and whispering to yourself “I will put it back later.” Spoiler alert: later never comes.

Every financial expert says the same thing. These are the core steps that make your budget work in real life.

1. Discuss Your Values: Start by asking what matters most to you and anyone else involved. If you are budgeting with a partner or roommate, everyone needs to agree on the plan. If one person is saving and the other person is living like a celebrity on tour, that budget will crash fast.
   
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2. Set Your Goals: What are your short and long-term financial goals? Maybe you want to create a budget to go on a big vacation, save up for a down payment on a house, buy a new car, or just build up your savings.
3. Prioritize Your Goals: Some goals need attention now, others can wait. Ranking your goals tells you how much money each one gets. Think of it like choosing which errands actually need to get done today and which ones can wait until tomorrow.
4. Determine Your Income: What is your take-home pay after taxes and other deductions? This is how much you have to build your budget.
5. List Your Monthly Expenses: Write down every single recurring cost. Rent, utilities, subscriptions, streaming services, insurance, gym memberships, the “free trial” you forgot to cancel that turned into a full time job. All of it.
6. Make Your Spending Plan: Once you know your income and expenses, you can see how much you have left for savings and goals. Also, be honest with yourself about groceries, gas, eating out, and those random Target trips that always turn into a full cart situation.
   
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7. Track Your Spending: This step is everything. A budget means nothing if you are not tracking your spending. You may discover you are eating out more than you thought or that your grocery budget needs adjusting. on track. Tracking your spending keeps you in check with your budget.
   
8. Evaluate Your Budget Regularly: Life changes. Your money should adjust with it. Review your budget whenever something shifts so you can stay aligned with your goals.

50 / 20 / 30 rule:

If you’re not quite sure how much you should be budgeting for different expenses, check out the 50 / 20 / 30 rule (via The Skimm). As a good rule of thumb, you should roughly plan for:

why budgets fall apart and how to fix it

If you have tried budgeting before and it did not work, you are not alone. Budgets usually fail for the same handful of reasons.

• You're Not Seeing Results Yet: Some people stop budgeting because they don’t see significant results. Make sure you re-evaluate your expenses and make changes or update your budget as needed. This will help in seeing results in your journey. Also, it’s important to trust the process. The longer you stick with it, the quicker results will come.  
• You Get Too Busy: Don't forget to take the time to budget. Your schedule can instantly become booked and you lose track of where you are in your finances. You can avoid this pitfall by setting up custom alerts or automatic transfers. 
• You Spend More Than You Earn: Do you tend to spend more than what you make on your paycheck and turn to credit cards to spend some more? This could be where you fail to recognize your spending style and triggers. By tracking your expenses for a month (or even a week) will give you a good idea of where your money is going each paycheck. It'll also highlight the unnecessary expenses to help determine what's truly important and what you can stop buying.
• You Forget About Emergencies: We know that emergencies can happen. They are unpredictable and are a pain to deal with when you’re not effectively prepared.  Learn about the 7 Steps to Building an Emergency Fund or - if you're already in a bind - What to Do If You Don't Have Savings in an Emergency.   

best budgeting tools:

There are also tons of resources you can use, but below are the top 4 tried-and-true methods:

• Skyla's Financial Wellness in Digital Banking: Did you know Skyla has free tools for you to use in Digital Banking? Simply log in and select Financial Wellness under the Plan & Learn tab to begin.
• The Mint App: Mint is a digital platform that can connect all of your different bank accounts, credit cards, car payments, mortgages, and more. You can also create budgets, savings goals, and access professional advice on products that may be a good fit for your lifestyle.
• The Good Budget App: Good Budget is a free digital platform that creates “envelopes” for you to put your money in. You can manually track your spending for the month and it will show you if you’re sticking with your budget. This is a much simpler version of Mint. It’s a free app, but you can upgrade for more envelopes if you feel like it’s needed.
• Actual Cash Envelope System: This is an old-school method where you have actual envelopes with cash in each. One envelope could be for “Groceries,” one for “Eating Out,” one for “Entertainment"... you name it. You’ll put the exact amount of budgeted cash in each category’s envelope and then you only use that cash for that expense. Here’s the kicker – once you’re out, you’re out!

you've got the basics... now what?

Now that you have what you need to be in control of your finances, it’s time to put your plans into action. Keep in mind when implementing your budgeting plan, stick to your goal. Don’t dip into and overspend all that you’ve worked so hard for.  By sticking to your budgeting plan, you’ll be proud of the outcome and feel confident in your money-making decisions.

ready for YOUR freebie?

If you feel ready to tackle your budget, grab the Smart Budgeting Kit to start reaching those financial goals. Enjoy!