Money management can be one of the biggest sources of anxiety for many U.S. adults, with57% feeling stressabout not having enough to pay for things in the present—and43% feelingstressabout saving enough for the future.
While most people have a desire to take control of their finances, they need a place to start.Here are four tips that can help you create a monthly budget—and stick to it for the long term.
1. Establish your income.
Before you can create a monthly budget planner, you need to know your financial baseline.Take stock of the pay you actually receive—subtracting 401(k) contributions, health insurancepremiums, taxes and any other payroll deductions.
If you’re paid a salary, your take-home income is easy to track. However, if your pay dependson unpredictable variables like hourly wages or commission, look at past pay statements and determine a reasonable average monthly income. Err on the side of expecting lower paychecks and take unusually high amounts out of the equation.
2. Make a plan.
Most spending can fall into three buckets:
- Needs
- Wants
- Savings and debt repayment
While there are many schools of thought on how to budget, one of the most popular—andsimple—is the50/30/20 budget. Here’s how it works:
If you need to tweak how you break up your spending, take from wants first, so that your needsand savings or debt repayment don’t suffer.
If you’re having trouble creating a monthly budget that fits your income, there may be ways tosave on your expenses. Shop around to see if there are better rates for things likeautoinsuranceor cellphone service. Or you may need to stop eating out and cook at home more.And here’s a tip: AAA Members can also take advantage ofexclusive discountson things theyuse every day.
3. Track your spending.
The most difficult part of any monthly budget is sticking to it, and bad spending habits can behard to break. Persistence and discipline are key, especially when you’re first starting out.
Popular free apps likeMintandPocketGuardcan help you track what you’ve spent so you canstay in control. (Here’s a list of other well-ranked budget apps.)
4. Refine and adapt your process.
Perhaps your grocery bills are lower than you expected. Or you’re driving more than youthought you would (and gas prices are so high). Maybe you got a nice raise at work. Whateverthe reason, it’s likely your budgeting needs will fluctuate over time.
Revisit your budget when your income or regular expenses change to ensure that you’reallocating the right amount in the right places. Make adjustments with your financial goals in
mind—and avoid making your budget what you wish it could be rather than what it needs tobe.
