Knowing how to make a budget is the single most important skill in personal finance. Good budgeting strategies can help you make the best of the money you have, and they can stretch your dollars further. If you're interested in learning more about budgeting like a pro, we're glad to help.
The Pro Mindset: Why Budgeting is Your Ultimate Financial Tool
If your money is like a house, then a budget is its foundation. No matter how much money you have, you need to know where it is and how it's being used. If you don't have that structure in place, it can be nearly impossible to build great things. A budget helps you plan for the future, and including savings in that budget allows you to handle emergencies that come up.
Building Your Budgeting Foundation: The Pro Setup for Success
No matter what form your final budget takes, there are three steps to follow in order to create your budget strategy.
First, you need to know your total income. If you're traditionally employed, you should use your net income (after taxes). If you have a 401(k) or other system that sends money directly from your paycheck to savings, add that amount to your net income. If you're self-employed, seasonally employed, or a gig worker, you'll have to do some more calculations and make sure to set aside some income to cover taxes. This total is the amount of money you have to work with each month.
Next, you need to know where your money is going. List every regular payment you can think of. Fixed expenses such as rent or mortgage payments, utilities, and car payments come first. Make sure to note the due date for each one. Next, list variable expenses. These include groceries and gas, which don't always occur at the same time each month, as well as larger items like home maintenance. Entertainment and other discretionary spending are also variable expenses. The Consumer Financial Protection Bureau has a spending tracker tool that can help you categorize these expenses.
Finally, you should decide how much of your income should go toward each of these spending categories. Common budgeting strategies include the 50/30/20 budget (where 50% of your income goes to needs, 30% to wants, and 20% to savings) and a zero-based budget (where every dollar is assigned a purpose).
The Pro's Toolkit: Advanced Budgeting Software and Systems
If making a budget seems like a lot of math, you're right. But you don't have to do it on your own, or even do the math yourself. There are many popular budgeting strategies and platforms out there, so there's sure to be one that works for you. If you're a paper-and-pencil person, you may want to start out with the CFPB's budget template. If you're more tech-forward, there are many apps and programs designed to help you build your budget. And of course, if you're a Coosa Valley Credit Union member, make sure to download our app: it can help you sort your transactions, save receipts, and more.
Your Journey to Financial Pro-ficiency
Now that you know how to make a budget, we'd love to help you reach your financial goals! We at Coosa Valley Credit Union have many branches throughout Georgia, and our expert team is glad to help. Contact us today to find out how to become a member!
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