Photo of tan gift wrapped with red bow and notebook that says 2018 budget and a list from 1 to 5

5 Steps to Creating a Budget

It’s the perfect time to start practicing good spending habits!

One of the most important steps to achieving financial success is creating a budget. But what’s even more important than creating one is sticking to it. Here are five things you need to know to create a budget that works for you.

1. Find out how much money you’re managing. 

In order to create an effective budget, you need to know exactly how much money you’re bringing in each month. Calculate your monthly income by adding your paychecks and any other source of income that you receive regularly. Be sure to only include your net pay rather than your gross pay. Your net pay is the amount you receive after taxes have been deducted.

2. Track your spending.

If you’ve ever felt like your money “just disappears,” you’re not the only one. Tracking your spending is a great way to find out exactly where your money goes. Spending $10 a day on parking or $5 every morning for coffee doesn’t sound like much until you calculate the total cost per month. Tracking your spending will help you pinpoint the areas where you’re spending too much and help you determine where you can make cost-efficient cuts.

Simply keep your receipts for the month or review your bank statements to see exactly what you’ve spent money on. Then, categorize your spending. You can calculate how much you’ve spent on bills, food, travel, entertainment and any other category that makes sense for you. This will help you visualize your spending and determine where you can make some cuts.

3. Set your financial goals.

Before we get into the nitty gritty, make sure you have a goal in place. Whether you want to set aside money for an emergency fund, bills, your education or a vacation – having a goal will make your process easier. Working towards a goal makes saving feel rewarding. Start by identifying and how much money you want to save each month.

4. Decrease your spending or increase your income.

When making a budget, you can either change the way you manage your current income or add a new source of income to be used primarily for saving. We know that getting a new job is not always an option, so we’ll focus more on ways to decrease spending.

Take a look at the categories you’ve created. From there, determine which items are your “wants” and which are your “needs.” For example, your rent or mortgage, groceries and electricity bill are needs, or your fixed expenses. Going out to dinner or buying new clothes are “wants,” or your variable expenses. The items you’ve determined to be your “needs” will cost you about the same amount each month. Calculate how much money you’ll need to cover those expenses.

Now figure out which of your “wants” you can do without. By reducing the number of times you go out to eat or go to the movies, you’ll start to have more money left over. Put your extra money in your savings account to get one step closer to your goal. After all, there’s a difference between saving a few dollars by using a coupon, and saving that money for your future.

5. Stick to your plan.

Make sure you stick to your budget. Following your plan will give you the results you’re looking for to reach your end goal! If you’re having trouble, the envelope budget system is a good place to start for beginners.


Let America Saves help you create a budge that works for you. It all starts when you make a commitment to yourself to save. Take the first step today and take the America Saves pledge to save money, reduce debt, and build wealth over time. And it doesn't stop there. America Saves will keep you motivated with information, advice, tips, and reminders to help you reach your goal. Think of us as your own personal support system.

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