As prices continue to go up and inflation steadily rises, tracking how you allocate your money and how to budget your monthly expenses is important for avoiding overspending. If you’re feeling financially strained, you’re not alone — in fact, 67 percent of Americans polled in 2022 are concerned about their level of savings.
A monthly budget helps you create a roadmap for covering your needs, wants, and savings each month, so you can not only be more mindful about how you spend your money but also plan for emergencies and long-term savings goals. Here are the key steps to consider when designing a budget.
Determine Your Monthly Income
Your income will be the total amount of money you take home every month, whether that’s from your 9-5 job, a side gig, a freelance business, etc. Ideally, your budget should involve spending less than your monthly income, otherwise, you’ll need to dig into your savings or borrow money to keep up.
Calculating your monthly income will set a limit for how much you can spend, and from there, you can segment that spending into line items of needs, wants, and savings.
Track Your Spending
If you’re not already following a budget and are starting from scratch, it’s always a good idea to spend a couple of months tracking your spending habits. You can either track your spending manually by keeping a close eye on your bank account or do so by connecting your accounts to an app that keeps track of purchases and their category (e.g., food, housing, insurance, etc.).
This will give you a clearer picture of the categories you allocate the most money toward, and help you determine if you need to make adjustments such as dialing back on ordering out or putting more money away for savings.
It’s important to consider where your financial priorities lie, which doesn’t mean that you have to be limited to essentials. Nonessentials should certainly be included in your budget as long as it is done so in a way that makes sense for you, your needs, and your goals.
Build Your Budget
There are three primary areas of designing a budget: needs, wants, and savings. A popular rule when building a budget is to stick to the 50/30/20 rule, which means 50% of your budget is allocated toward your needs like housing and food, 30% is dedicated to wants, and 20% is put away for savings and emergencies. Even if you can’t follow this rule exactly, it’s important to make sure you are covering all your required expenses and saving as close to 20% of your income as possible to create good financial habits.
Once you put a budget into place, it won’t simply play out automatically. It’s important for you to continually track your spending against your predicted expenses, adjust as necessary, and refine your budget as your priorities shift over time.
Have Questions? Ask Our Team!
At Republic Bank, we have dedicated bankers and financial advisors to keep you on the right track to financial success and confidence. If you need assistance getting started with a budget or adjusting an existing one, we’re happy to help! Give us a call at 800-526-9127 and be sure to check out our other online resources.