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Budgeting

A budget is a plan, an outline of your future income and expenditures that you can use as a guideline for spending and saving.

Only 40 percent of Americans use a budget to plan their spending. But 60 percent of Americans routinely spend more than they can afford. A budget can help you pay your bills on time, cover unexpected emergencies, and reach your financial goals—now and in the future. Most of the information you need is already at your fingertips.

Start by following the simple steps outlined below to get a clear picture of your monthly finances.

1. Add Up Your Income
To set a monthly budget, you need to determine how much income you have. Make sure you include all sources of income such as salaries, interest, pension, and any other income sources, including a spouse’s income if you’re married. Using the worksheet below, write a dollar figure next to each relevant income source. Make sure that the figure you write down is the amount you receive from each income source on a monthly basis.

If you get a salary, be sure to use your take-home pay, not your gross pay. Taxes are usually taken out automatically, but if they’re not, remember to include them as another expense. If you receive money from somewhere not listed, enter the source of that money along with the amount under "other income."

2. Estimate Expenses
The best way to do this is to keep track of how much you spend each month. The worksheet divides spending into fixed and flexible expenses. If some of your expenses for one or more category change significantly each month, take a three-month average for your total.

3. Figure Out The Difference
Once you’ve totaled up your monthly income and your monthly expenses, subtract the expense total from the income total to get the difference. A positive number indicates that you’re spending less than you earn – congratulations! A negative number indicates that your expenses are greater than your income and gives you an idea of where you need to trim expenses and by how much.

Well done - you’ve created a budget. The next step is to make adjustments to this outline in order to achieve your financial goals. Track your budget over time to make sure you’re on track.

Download Budget Worksheet (pdf)