There are almost no bad reasons to follow a budget, but many great reasons to start one — particularly the ability to better control your finances, no matter what's happening in the economy. Between inflation and economic instability, Americans appear to be more financially tapped than usual.

A recent CNBC survey reveals that 58% of Americans say they're living paycheck-to-paycheck, and 70% of Americans say they're stressed about their current financial situation.[1]

But regardless of where you are financially, a budget can be a road map for determining what to spend and what to save, especially if money is tight. Here's an overview of how a solid budget may help keep you on track.

Commit to a Budget

Financial experts suggest always following a budget,[2] but we often turn to budgeting when we want to reach a financial goal or we feel like we’re in an emergency. Verbalizing and writing down your short- and long-term goals is an important part of a spending and savings plan. For many people, this is the part that can incentivize and motivate you to stick to the budget you made. It can be easier to skip more expensive takeout nights when you know your penny-pinching will pay off in vacation dividends or go toward a down payment on a home.   

Money can often be emotional, and when you personalize your savings goals, it can motivate you to commit to reaching a financial milestone. To get started, you can try a few popular budgeting methods, such as 50/30/20 — which divides your income by contributing 50% to needs, 30% to wants, and 20% to savings and repaying debts — or the cash-based envelope system.[3] There are many budgeting systems out there, but it's best to find one that works for your lifestyle. 

There are also various tech-based apps and calculators to help jumpstart your budget. If doing your own calculations feels intimidating, PNC's Budget Worksheet is a great tool to run the numbers, and Virtual Wallet® includes several helpful budgeting tools, as well as an account structure that helps you spend, reserve, and grow your money to suit your goals.

Create a Budget That Works

You can start a budget with a few simple steps. First, you'll want to know your income, expenses, and savings goals. 

Budgeting is rarely a “set-it-and-forget-it” endeavor. Instead, you’ll likely need to adjust your budget to current and shifting needs, circumstances, and goals. As you create your budget, consider how it might look throughout the seasons, evolving life circumstances, and any changes to your financial situation.

Know How Much You Make

If you’re not already intimately aware of how much you make, you will be after this step of creating a budget. You’ll ideally want to add together all sources of your net income, which is your after-tax income. This is likely the money you make from your job or self-employment income, as well as any additional side hustles or sources of income you may have.

Know How Much You Spend

Here’s where you get to play detective and inspect your expenses for at least one month, though six months may be even better. Look at bank statements, credit and debit card statements, or any additional money you use to pay for goods and services. Ideally, your income should cover all your expenses. Categorizing your expenses is one way you can continue analyzing how you're spending your hard-earned cash.

At first, all expenses may feel necessary, so how do you determine needs versus wants? Needs are typically those things one requires for daily living (housing, food, utilities, etc.). A want would be a new TV.  

Another thing to consider is whether the expense is fixed or flexible. Determining the frequency of an expense is another good reason you may want to scrutinize statements for more than one month. Utility bills, for example, may be monthly, but even they may have some flexibility from bill to bill.

Depending on where you live, you may have high summer bills but lower winter bills or vice versa. Some expenses may occur every once in a while, such as quarterly pet grooming or school supplies.

This exercise might feel tedious, but you may discover a gym fee or subscription service you haven’t used in months and can now cancel. Finding ways to remove unnecessary spending can help you save that money instead.

Develop Your Short- and Long-Term Savings Goals

Now that you have your income and expenses mapped out, it’s time to decide how a budget can help you achieve financial success by defining your long- and short-term goals. 

  • A short-term goal is one that can be accomplished within 3–6 months. 
    • Example: Saving for a weekend getaway in 3 months. 
  • A long-term goal is one that can be accomplished within 3, 5, or 10 years. 
    • Example: Paying off your mortgage in 10 years.

Save To Reach Those Goals

It's important to make quantifiable savings goals — meaning, you should be able to put a number on each of them. If in the short-term goal, the goal setter wants to spend about $600 on their trip, we would divide this amount over 3 months. The updated goal becomes: 

  • Save $200/month for a vacation, or $100 from each paycheck.

A long-term goal, such as maximizing your savings, should also have a number. How much do you want to have saved? When do you want to reach that number? Quantifying your goals is one way to help you start putting your goals into action.

Review and Update Your Budget

Remember that budgets aren’t stagnant. Goals and motivations change, as do circumstances. You might get a raise or hit a rough patch.

Why not check in with your budget to see whether your short- and long-term goals still make sense? And if it’s no longer something you want, why not take the opportunity to revise that goal?

One way to do this is to place a reminder in your calendar every six months — or any other interval that makes sense to you — to review and update your budget.

It’s all about timing and patience. Making a budget can help you sync how you're actually spending with how you want to be living. Mastering the basics may help you save money and achieve your financial goals.