If money’s been a little tight, you probably already have a keen sense of when it’s coming in and when it’s going out. Even if you keep close tabs on your money, creating a formal budget can still benefit your financial health.

For one, it removes the pressure of keeping track of your finances in your head, freeing up mental real estate to pursue your other goals. It also helps you review and compare your financial options and creates positive financial habits that will help you as your income grows. 

Creating a budget is also simpler than you think. From tracking your spending to preparing for setbacks, here's how to build a budget that can help you meet your financial goals.  

Step 1: Gather your bank statements and track your spending

Creating a budget starts with knowing how you spend your money now. You can look back on 6 to 12 months of bank statements and write down: 

  • How much money is coming in (and when) 
  • How much you spend on basic living expenses, like rent, utilities, insurance premiums, car payments, groceries and out-of-pocket expenses 
  • How much you’re spending on debt repayment
  • How much you’re putting into savings
  • How much of your budget is discretionary spending  

If you’re a PNC Virtual Wallet® or Foundation Checking customer, you can access your statements and account activity within PNC Online Banking.[1]

Step 2: Create a system for budgeting

Following a budget means keeping track of your statements, financial documents and receipts. So, it's important to find an organization method that works for you. 

You can create a series of digital or physical folders in which you can store your key financial documents.

Virtual Wallet customers can use the Spending + Budgets tool in Online Banking or in the PNC Mobile app. This allows you to consolidate spending methods (debit card, credit card, bill payments, etc.) and create budgets for spending categories (education, groceries, entertainment) – all in one view. Then, you can set up alerts[2] to help keep you informed about spending, so that you’re able to stick to your budget.

You’ll also need a digital or physical calendar to keep track of your cash flow each month. Find one that works for you and start budgeting by recording your paydays and other instances of payments coming in. If you’re a Virtual Wallet customer, the built-in Virtual Wallet Calendar does this for you.

Step 3: Identify top-priority spending

When you start building out your monthly budget, you can start with essential spending that covers your basic living expenses. These expenses can include: 

  • Rent or mortgage payments 
  • Utilities 
  • Insurance premiums 
  • Transportation costs
  • Out-of-pocket medical expenses 
  • Debt repayments (student loans, credit cards, auto loans and other debts)  

If money’s tight, you can look for opportunities to reduce spending. If debts are getting in the way of you meeting your goals, you can either call your creditors to try to lower your interest rates or consider debt consolidation. 

Mark the due dates for each of your expenses in your calendar. Add up your essential spending and compare it to your income to determine how much is left over for discretionary spending. 

Step 4: Build savings into your budget

Saving is important, even if you’re on a tight budget. Every penny truly counts: Not only will each dollar you stow grow over time, thanks to interest, you’ll also create positive financial habits that you can expand on as your income grows. 

Review your expenses and find a savings goal that works for you. Then, look at your calendar and decide the best day to pay yourself. If most of your bills are due early in the month, for instance, it may be easier to pick a day mid-month to move money into savings. 

If your income fluctuates month to month, consider a percentage savings goal instead of a dollar goal. That way you’ll save less in leaner months and more when you’re flush with cash and your budget feels more manageable. 

Finally, make saving as easy as possible. Auto Savings automates your savings, so you’ll never forget to save.

Step 5: Make the most of your discretionary spending

Once you’ve built basic living expenses and savings into your budget, it’s time to plan for everything else. Use your current spending habits as a template to determine how much to budget for groceries, clothing and personal hygiene, as well as entertainment.

As you build your budget, look for ways to optimize your spending. For example, you can time your trips to the grocery store around when you have the most money available. Perhaps this will allow you to buy groceries in bulk, which saves money over time. 

Look over your entertainment spending and identify any areas you can cut back without feeling deprived, which splurges help you feel your best. Create a “treat yourself” budget to spend in ways that truly bring you joy, so you’ll feel motivated to stick to your goals. 

Step 6: Plan for unexpected windfalls

Planning around your typical income is one thing, but what happens if you come across extra money? Income tax refunds, side gigs and overtime can all add to your income each month, and you should make a plan for how to spend that extra money wisely.

Decide in advance which of your financial goals – increasing savings, debt repayment, home updates, something else? – is most important. This way, when you find yourself with extra funds, you can allocate them accordingly. 

Step 7: Be patient and stick with it

The benefits of budgeting can take some time to pay off. At first, you’ll have to invest a little extra time and energy into setting up your budget, tracking your expenses and reviewing your finances. 

Ultimately, though, budgeting will save you time. You’ll know where your money is going, rather than having to make mental calculations throughout the month. You’ll also save hours of stress because budgeting helps you track your progress toward your goals, rather than having to guess how you’re doing.

Still, it’s likely you’ll need to make some adjustments to find a budget and budgeting system that works for you. After a few months, you’ll know what’s working and what isn’t, and you can adjust your methods to fit your lifestyle.  

Finally, allow your budget to grow and adapt as your income changes. If you create positive budgeting habits now, you can create a foundation for better money management later, so you can feel confident and secure in your finances at any income.