How to Make a Budget and Stick to It with NHSNB
If you're having trouble keeping up with your bills or find yourself wondering where your money is going, it's time to take control of your finances by creating a budget.
Budgeting has a reputation for being overly constrictive but when executed correctly, a budget will help you be more confident in your purchases and enjoy financial freedom.
In this blog, we’ll walk you through the steps of how to create a budget and stick with it.
How to Create a Budget:
The first step to creating a budget is to determine your income.
Ask yourself how much you make and write it down, then confirm it by checking your paystubs and other forms of income (side hustle or investments). Is this amount of money what you expected?
If your income varies from month to month, consider using your minimum monthly income to
determine your earnings.
By focusing on the lowest amount earned per month, you ensure a conservative estimate that allows for financial planning with a good margin of safety.
Next is to record your purchases and expenses.
Check your expenses by reviewing your credit card transactions, bank statements, online money management accounts (Venmo, Paypal, CashApp), and the amounts of cash that you withdraw.
Your expenses include all the money you spend each month, from bills to groceries to entertainment. You can use a spreadsheet, an app, or simply pen and paper to track your expenses.
Now that you know what your expenses are, you can put them into categories.
Categorize your spending into groups such as housing, transportation, food, and entertainment.
This will help you see where your money is going and identify areas where you may be overspending.
Set Financial Goals and Executing Your Budget:
Now that you know what is going on with your money, it’s time to identify what your goals are.
Are you saving up to make a down payment on a home, paying off debt, or building an emergency fund? Having specific goals in mind will help you stay motivated and focused on your budget.
Finally, it’s time for you to execute your budget into a plan.
Using your income and expense information, create a list of how you will allocate your money. If you can, consider establishing an automatic deposit for your designated savings account (out of sight, out of mind!).
Start your list with your essential expenses, such as housing, transportation, and food. Then, allocate money towards your financial goals. Finally, allocate money towards discretionary expenses, such as entertainment.
How to Stay on Track with Your Budget:
After working with your budget for a month, take some time to review and adjust:
Ask yourself: How did you feel after following your budget? Do you think there are areas where you should increase or decrease your spending?
It's okay to make changes to your plan as needed and don't get discouraged if you don't stick to it perfectly. Take it one step at a time and be gentle with yourself.
Other tips for staying on track:
It’s crucial to remember that you are creating your budget so you will have more control over your finances now and in the future, imagine how you will feel when you achieve the goal you set to stay motivated.
Watch out for impulse purchases (Purchases that are not planned in advance).
Unsubscribe from email newsletters and unfollow brands that you shop at frequently.
Before you make any non-essential purchase, take a day to consider the purchase and the benefits you are seeking from the product or service (is it worth more than your big goal?).
If you’re in need of more financial advice, we invite you to join one of our financial fitness workshops or you can schedule to meet with one of our financial counselors.
