A Complete Guide to Budgeting

Between monthly bills, student loans, groceries, childcare and other common expenses, costs can add up fast. If you don’t keep track of your money, you may find yourself financially overwhelmed. But don’t worry, a budget could save the day! Learning the ins and outs of a budget is a great skill that can prevent financial headaches. Take advantage of our complete guide to budgeting to know where your money is going instead of wondering where it went!
 

Jump Ahead to Each Step

1. Determine Your Priorities
2. Calculate Your Income
3. Choose a Budgeting System
4. Be Diligent and Stay on Track
5. Automate Your Savings
6. Revisit Your Budget

 

1. Determine Your Priorities

You may find it easier to save when your priorities are laid out before you. Saving to save is great, but having specific goals to reduce debt or build an emergency fund is better! Plus, having goals can help you stay motivated. To get things started, try setting your top priorities and the reason you are creating a budget. Here are some common priorities that you can use as a reference.

• Reducing High-Interest Debt: High-interest debts like credit cards or independent loans can be a weight on your monthly costs. The interest incurred by these accounts can end up costing you two times more than what was borrowed. Make it a point to take any extra cash you have earned from your budget and put it towards these expenses or make a budget specifically to pay these off as fast as possible.
• Saving For an Education Fund: Whether you’re planning on going back to school or want to start an account for your child, setting money aside in your budget for an education fund is always a good call. Education costs are high and avoiding as much debt for yourself or your child’s future can help a lot in the long run.
• Create an Emergency Account: Emergency funds add a necessary safety net against sudden financial troubles. As a rule of thumb, it's helpful to build up an emergency fund that is three to six months of your living expenses. Having one of these accounts lined up can be a great way to avoid extra debt if you have an emergency.
• Building Your Retirement Fund: It’s never too late or too early to save for retirement. Open an IRA or create a separate savings account to complement your 401K. Even if you can only add a small amount, that amount will grow over time.
• Saving For Yourself: Never forget about yourself! We all need some spending money from time to time. Once you have taken care of the heavy debts and created necessary savings accounts, you can focus on building a savings for your personal spending. Use the funds to invest, buy concert tickets or save for a new car. It’s up to you, so do what makes you happy! However, we advise that this is not priority number one. Focus on finding balance with your debts before spending on yourself.

 

2. Calculate Your Income

It’s important to lay out your financial plans and create a budget that matches your lifestyle. Like many things, the first steps can often be the hardest. After laying out your priorities, determine the income you take home each month and subtract the necessary bills from that amount to get a sense of how much money you have left over.

Use your net income as a launching point for your goals! If you are having trouble with this step, you can always use the Financial Health Checkup tool in Digital Banking for a complete evaluation. This tool can provide personalized tips on how to make improvements for your financial health. Additionally, we offer multiple online calculators to help you evaluate your savings goals, mortgage calculations or debt consolidation.
 

3. Choose a Budgeting System

Once you have an idea for your expenses and the funds you bring in on a monthly basis, you can take that information and create the foundation of a budget. Keep in mind, that not all budget frameworks are the same. Different systems use different techniques to save you money depending on your habits, personality and the way you approach your income. Using one of the many budgeting systems and sticking to it can help you understand:

• What income you have
• Where your income is going
• Your total expenses
• How you can adjust spending habits to reach savings goals

Read about the top budgeting tactics below and see what works for your lifestyle.
 

Pay Yourself First

This concept is a reverse style of budgeting where you take your monthly income and set aside cash for your savings goals first. After that, you use the rest for necessary bills and other expenses. Figure out what percentage you want to save each month and automatically take that amount out per paycheck right away. You can always increase or decrease the amount you are taking out depending on your comfortability.

• Great for those who want to save without investing a lot of time and energy into a budget. 
• It’s not the best strategy for those that have very little wiggle room with bills and leftover income.

 

50-30-20 Rule

This strategy involves splitting your income across three categories. Break out your money into 50% for needs like bills or groceries, 30% for wants like a night out with friends and 20% for general savings or paying off debt. Remember, it’s important to stay consistent with your categories. Swapping expenses from bucket to bucket is not ideal and can ultimately defeat the purpose of the budget.

• Perfect for those who need a consistent strategy for saving money, but don’t need to worry where every dollar goes.
• Not ideal for those with changing expenses like contract workers.

 

Envelope System

This strategy is an oldie but a goodie. Set your spending limit for each category you spend money on like groceries or utilities. Then fill an “envelope” with money you will use on that category. While using a physical envelope used to be the preferred method, you can approach this any way you like. If you’d prefer doing this electronically, you could create separate savings accounts with the names of each account labeled as a spending category. This method helps to prevent overspending in unnecessary spaces or can help reach a savings goal.

• This strategy works for those who want a physical grasp on where their money is spent.
• Since this method involves physical money, it can have the pitfall of misplacing funds. Additionally, it requires time and energy to manage several “envelopes.”

 

Zero-Based Budgeting

Great for planners, this method uses every dollar and cent deliberately. Allocate your money to all needs, wants, investments and savings. The goal: income minus expenses, equals zero. Lay out your take-home income for the month. List all your necessary expenses like your mortgage and car insurance. Then add any other expense categories like entertainment. Take your income and start subtracting your expenses from it. Whatever is left, move it to savings, retirement accounts or an emergency fund until you reach zero.

• This is a good strategy for budgeting pros who want to know every detail of their dollars spent.
• This won’t work for individuals who prefer an out of sight out of mind method of saving.

 

The Loud Budgeting Scenario

Imagine this, you just started saving for a vacation. You need a plane ticket, a place to stay, rental car and more. But some friends just invited you to join the weekend excursion of a lifetime (or so they say). You have enough money to join, and serious FOMO has just kicked in.

You try working up the courage to say no, but they insist that you can’t miss this opportunity. So instead of speaking up and saving for your trip, you go with your friends and hope that you will be able to afford all the expenses for your upcoming vacation. On top of that, you’ll have to cancel some of the fun events you planned on your trip due to budget constraints.

While this scenario may seem specific, you can easily interchange parts of the story to match situations that we have all been in. No one wants to feel like the “fun police” spoiling a good time, and it can be hard to speak up in these situations. This is where the concept called loud budgeting comes into play! Let’s dive into what this means.
 

What Is It and How Is It Used?

Loud budgeting is a financial trend that has taken social media by storm, and for good reason. Recently, it has become easy to compare oneself to the exciting or picture-perfect lifestyle that many social media influencers portray. Mimicking their life of luxury may be fine for a moment, but unless you have the money to back it up, it’s a fleeting idea that can leave you tight for cash until your next paycheck.

Loud budgeting is attempting to normalize living within your means and focuses on boundary-setting and communication for your current financial situation. The goal is to speak up about what you can and cannot afford and to hold yourself accountable for your savings goals. Additionally, it’s a great way to combat money shaming and informs your peers that you’re living within a budget. While loud budgeting is a great tool to keep you on track, it’s not a complete roadmap for saving money. Try using this method on top of one of the budgeting systems above to maximize your budgeting capabilities!
 

4. Be Diligent and Stay on Track

Once you’ve laid out your total income, determined your savings goals and picked a system the last thing you want to do is let that information sit. Make sure you are always taking steps to keep your budgeting plans top of mind.
 

5 Ways to Keep Budgeting in Your Daily Life

• Do Your Research: If budgeting is a new concept to you, take your time and research budgeting tips and tricks. Listen to a financial podcast, watch videos on good tactics for saving money or follow someone on a similar journey. There are a lot of budgeting methods out there, so make sure you find the one that fits you.
• Share Your Goals: Talking with others, like a friend or family member, about your goals can help you understand how far you have come with your own finances. Or it could help you figure out a difficult part of your savings journey. At the very least talking it through will keep a consistent spotlight on your budget goals.
• Be Positive: Always keep a positive outlook on your finances! Whether you’re looking at a mountain of debt or are saving money for a big vacation, we have the tools to help you get there. Write yourself a positive note or ask others to give you a confidence boost when needed. Remember, proper budgeting is a marathon, not a sprint.
• Don’t Compare: We often form a habit of comparing our current situation with others. Remember that we all come from different backgrounds and your circumstances could be completely different from someone else’s. If a friend or coworker has zero financial troubles, don’t think poorly about your current progress. Keep going and focus on your goals, not the status of others.
• Planning and Consideration: Make it a habit of keeping your budget goals on hand. Next time you plan a road trip, vacation or special event, seeing your goals while planning can help keep them top of mind.

 

3 Ways to Keep Savings Goals on Track

• Talk With an Expert: Make an appointment with a professional. Chatting with an expert on the subject can be an invaluable experience. Make it a point to sit down and review your current financial situation, create a budget roadmap, talk about key milestones and discuss different avenues. Our financial consultants are always here to help you reach your goals.
• Find Alternative Routes: Your base income will get you far, but make sure you look at other income sources. There is more than one way to reach your savings goals. Products or services like investment centers, money markets, certificates and rewards credit cards are all great options for out of the box savings options. Look to Landmark to get started with one or more of these account types.
• Budgeting Programs: Loud budgeting, the 50-30-20 rule and zero-based budgeting are not the only budgeting tactics to pop up, and they won’t be the last. If you currently have a keen understanding of your debts, income, goals and spending habits, you’re already practicing a healthy budgeting lifestyle. If not, use one of these systems to get a grasp on budgeting basics. As long as you’re not stuffing your cash under the mattress, any one of these strategies can help.

 

5. Automate Your Savings

Have you ever thought that you’d have enough for your savings goals by using what’s left over from your monthly paychecks – Come to find out that you spent more than you should have? Try automating your savings so you’re not tempted to spend more than you make.

Automating your savings can be done by adjusting your paychecks direct deposit so a small percentage goes into a separate savings account. This makes use of the “out of sight, out of mind” mentality for savings. Additionally, you can set up automatic transfers in your bank account. The frequency at which the transfers happen, and the amount is entirely up to you. You could set up a transfer four times a month of $50 or a one-time transfer of $200 at the end of the month.

This is one small step you can take to help reach your savings goals and enhance your budgeting capabilities. Check out our recent article on everyday money saving tips to grow your savings faster.
 

6. Revisit Your Budget

Stick to your budget by keeping it as a constant reference for your monthly expenses. Remember that making changes and saving money can fall short if you don’t keep it top of mind. Do yourself a favor and revisit your budget at least once a month. Doing this will keep you aware of where your money is going at all times, and can help promote positive spending habits.

 

Breaking It Down

Creating a budget and sticking to it can be a lot easier said than done, but strategizing with ideas like loud budgeting or the 50-30-20 rule can help you stay accountable. Simply put, they help you make better spending choices that can support your savings goals.

Building confidence in your personal and financial decision making is key when sharpening your budgeting skills. The more comfortable you are in your situation and the more knowledge you have on what you can and cannot spend, the better off you’ll be. There are plenty of tools out there to get you started, and Landmark is here to help! Start by analyzing your personal financial health in Digital Banking or scheduling an appointment with a personal finance officer.


Digital Banking Budgeting Tools

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Get a head start by using our budgeting spreadsheet! This can serve as a template for your expenses and a starting point to create whatever budgeting system you use.

Download Budgeting Spreadsheet