Building a Budget You Can Live With

Building a Budget You Can Live With
Creating a budget helps you control your expenses and save money. (Fida Olga/Shutterstock)
Mike Valles
One of the best ways to manage money is to create a budget. Not having one could mean that money is spent on trivial things, with nothing to show for it in the long run. A budget does not have to be complex to work—especially if you have never created one before. Here are some steps you can use to create a family budget.

Calculating Total Net Income

The first thing you need to do to create a budget is to know how much total money you bring in each month. This includes all the money you bring home after taxes. It does not include any regular paycheck deductions. If you are self-employed and bring in varying amounts each month, calculate the average monthly income you receive.

Determining Monthly Expenses

Work on figuring out your monthly expenses next. It is important that you understand where every penny is going. List all your bills and expenditures—whether fixed or not. Include mortgage payments or rent, memberships, groceries, fast food purchases, car payments, insurance, transportation, and everything else.
Create categories for these expenses. This will help you understand your fixed expenses and your discretionary, or optional, purchases. BetterMoneyHabits suggests writing down your expenditures daily so that you are sure not to miss any of them. Do this for one or two months. You can record them on paper, with a budget app on your phone, or using a budget sheet. You can also find a list of the top budgeting tools at EpochTimes.
Evaluate where all of your discretionary income is going. If you no longer need to spend money on some items, eliminate them. If you are paying late fees on some of your bills, seek to save money by paying all your bills on time. To save more money, use credit cards only if you can pay the full amount each month.

Making Financial Goals

After you understand what your monthly needs are and how much you have in the way of discretionary income, you will need to set some financial goals. You can make short-term and long-term financial goals.

A short-term financial goal may be to pay off your credit cards or save for next year's vacation. Your long-term financial goals may include putting more money into a retirement fund to ensure you have enough to retire comfortably.

Nerdwallet suggests that you use a 50-30-20 budget rule to create your budget. This rule encourages people to use only 50 percent of their monthly income for necessary expenditures. Another 30 percent of your income could then be used for things you want, and the final 20 percent for savings and paying off debt.


Needs are the basics: things you can't do without. First among these is usually rent or mortgage payments. Other needs usually include utilities, food, clothing, transportation, and insurance. "Need" expenses usually occur on a regular basis, whether it is monthly, yearly, or less frequently.


Wants are non-essential and often for fun. They include dining out, monthly subscriptions, travel, and entertainment.

Charitable giving usually falls under this category. While many consider this a non-negotiable, the amount you give may be flexible and determined by other expenses, thus placing charitable giving in this second largest category.

If you examine your "wants" category, you might find that things you think of as "needs" are actually "wants."

Saving Money

The final 20 percent of your available income should be split between paying off debt and savings.

Thinking long-term is essential when you're saving. That means saving money for retirement. Social Security is seldom enough to live on comfortably. It is intended only to supplement other income or savings after you retire. And more money is needed for retirement today, because people live longer than they did 30–50 years ago.

You may want to keep your money for savings—whether short- or long-term—in a separate, interest-bearing savings account of some kind.

Long-term savings frequently includes a retirement plan such as a 401(k). Many employers offering retirement plans may match your contributions up to a certain amount. Take advantage of this free money by making the maximum allowable contributions to your retirement account.

If your employer does not offer retirement accounts, or if you're self-employed, be sure to get one on your own. You may want to consider a solo 401(k) or an IRA.  Money lists several different types of retirement accounts—with a brief explanation of each.

Saving also includes an emergency fund. Sooner or later, you will have unexpected expenses, such as medical bills, car or house repairs. It is a good idea to have at least $1,000 for emergencies—and it needs to be easily accessible.

Finally, an important part of this category is paying off debt. To minimize debt, learn to save money for more expensive items, rather than buying them on credit. Remember that anything you buy is cheaper if you are not paying interest on it. Having less credit debt (less than 30 percent of available credit is recommended) could also help to raise your credit score.

Making Adjustments

After you have created your budget, some adjustments will probably be needed. You may have forgotten to add something, or the amount you set for one category may not be enough.

There may also be additional expenses, seasonal or occasional, requiring more money to be spent from one category or another. This may include things that you do not buy on a routine basis, such as school expenses, new shoes, and medical needs.

To ensure that your budget stays relevant, Bankrate suggests that you review it every six months and adjust it to meet new needs that may have cropped up. If your budget becomes outdated, it also becomes useless as a tool to guide your expenditures and savings.

Controlling Your Expenses

After you create a budget, only you—along with others having access to your money—can control where the money goes. A budget is an ideal or a tool to help control where your money goes. Self-discipline will be needed to limit your purchases to what the family budget allows each month.

After you have spent your allotted amount on extras—such as fast food and eating out—curtail further spending in that area until next month. Or, take it from another discretionary area—but stop spending in that area, too, once that limit is reached.

You will still need to record your daily expenses to avoid overspending in any one area. Remember that any time you overspend in one area, it means having less to spend in another category.

The Epoch Times Copyright © 2022 The views and opinions expressed are only those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
Mike Valles has been a freelance writer for many years and focuses on personal finance articles. He writes articles and blog posts for companies and lenders of all sizes and seeks to provide quality information that is up-to-date and easy to understand.