Sometimes people think they don’t have time to make a budget or feel they’re too far behind for a budget to help. Despite these beliefs, a realistic budget can help you:

Gain control of your finances: A budget can help you ensure you have money for your needs - everyday expenses and other obligations - as well as help you make better decisions about what you can afford, such as going out to a restaurant.

Get and stay organized: A budget shows you your past spending so you can better plan you future spending.

Get your family to work together towards a financial goal: Creating and managing a family budget together lets you talk about money matters and work together towards shared goals.  Even if your kids don't make financial decisions, including them in your planning can help them start learning about good money management habits.

Reduce or avoid debt: With careful budget planning, you may find ways to reduce some expenses and increase your payments towards any monthly credit card or loan payments.  This can help reduce the overall amount of interest you'll pay.  Controlling spending can also help you avoid new debt.  

Save money: By reducing unnecessary expenses and living within your budget, you may be able to free up money for a future unexpected need or even a vacation.

Identify every source of income

The first step in budgeting is to identify where your money comes from and how you spend it.  There are more sources of income than a weekly paycheck.  Be sure to think of all of them:

1. Wages and salary
2. Bonuses, commissions, tips
3. Government benefits
4. Worker's compensation
5. Unemployment compensations
6. Disability benefits
7. Pensions or annuities
8. Social Security benefits
9. Alimony and child support
10. Tax refunds
11. Scholarships or fellowships
12. Interest and dividends

Now think about your necessary expenses

This is money spent on the things you need, which are called non-discretionary expenses.

1. Rent or mortgage
2. Utilities (electricity, phone, etc.)
3. Food
4. Clothing
5. Insurance
6. Child care or tuition
7. Transportation (to work, doctor appointments, etc.)

You may also have optional expenses

This is money spent for things you want, which are called discretionary expenses.

1. Restaurants
2. Clothing for occasional, special items
3. Entertainment
4. Gifts and contributions
5. Travel for vacations, road trips, family visits
6. Personal care like haircuts and visits to a nail salon

Next, identify all your day-to-day expenses. To do this, carry a small notebook or use a mobile device to list every expense – what you bought, how much you paid, and how you paid for it – over a period of two weeks or more to be sure you have a complete list.​

Once you’ve identified your needs and wants, your routine monthly payments, and day-to-day spending habits, it is time to develop your budget.​

Table 1: Expense Tracker

Planning gives you more control over your spending. You can develop a budget based on an entire month, for a week, or for two weeks.

1. Establish categories for your expenses based on your past spending patterns.​
2. Set estimated targets for how much you would like to spend in each category by the week or month.​
3. Decide whether you can – or would like to – pay more or less in each category.

Table 2: Paycheck Planner

Planning gives you more control over your spending. You’ll need to track your income and which expenses you pay when.​

Tips & Tools: Using a Paycheck Planner​

You can use a paycheck planning document to help you track your pay dates and determine which expenses will be paid with each paycheck.​

​Consider planning your budget for a few months in advance and refer to it every time you are paid, to remind you of your plan and ensure you are on track. 

How to Use a Paycheck Planner​

Use your paycheck planner to:​

1. List your expected sources of income by date.​

2. Fill in planned expenses (for example, food and transportation) and how often you need to pay for them.​

3. Set estimated amounts for paying each of your expenses.

Use these tips to keep your budget on track:​

1. “Pay yourself first” by setting aside a regular savings contribution – no matter how small – from every paycheck or at least once a month.​

2. Avoid late fees on bill payments by ensuring your payments arrive before their due dates to allow for processing time.​

3. For pay periods when there is more income than your estimated expenses, consider putting the extra money into a savings account. This money can be used to cover your needs if you have an unplanned expense.

Once you’ve tracked your income and expenses, you’ll need to evaluate how you’re doing in balancing the two. You can use the Paycheck Planner to see how you did!​

1. Subtract the Actual Expenses from the Estimated Expenses.​

2. Note the amount underspent or overspent in the Difference column.​

3. For each Expense category, complete the Difference column.​

4. Look for areas where expenses could be reduced or where you need to increase your spending amounts.

By using a budget, most people can gain more control over their money, reduce their expenses, and save money.​

​Here are some ideas for reducing common expenses.

Utilities:​

1. Gas or oil. Reduce heating bills with a programmable thermostat.​

2. Electricity. Conserve energy by turning off lights and other appliances not in use.​

3. Water. Use less by replacing fixtures that may have leaks or choose low-flow options. Periodic maintenance may cost you money now but could save you more money over time.​

4. Phone. Cancel services you don’t need. Select the least expensive data plan and use secured Wi-Fi whenever possible.​

5. Cable & Internet. Consider if streaming video and TV services will meet your needs and might be less expensive than Cable TV.​

Food:​

Stock up on items on sale. Tailor your meal planning around food choices that are in season. Use store brands whenever possible.

Transportation or gas:​

Get a monthly or weekly public transit pass instead of a daily one. Use ride-sharing services sparingly and only when less expensive alternatives are not available.​

Car maintenance:​

Take your car in for regular maintenance, which can prevent more severe problems. Plan several months ahead for periodic expenses, such as oil changes or other scheduled maintenance, so you’re less likely to have surprise expenses.

Education:​

Check if your employer offers a tuition assistance program. If you pay tuition for any children, check with the school about any scholarships or grants that might be available.

Personal expenses:​

Consider shopping for clothes at less expensive stores or wait for an item to go on sale. You may want to save on restaurant expenses by eating out only on special occasions. Renting or streaming movies instead of going out to the theater is another idea to consider.​

Monthly subscriptions:​

Opt for free services; they may include ads but are generally cheaper than streaming services. If paying for streaming services, limit subscriptions to services that do not have a free option.