Budgeting 101: 4 Steps to Setting a Budget That Works

How many times have you created a budget for yourself only to neglect it days later? You're not alone—setting and sticking to a budget is one of the more difficult aspects of becoming financially secure.

It's not impossible, however. Here are four easy steps to get started:

1. Record and evaluate everything—A crucial part of budgeting is to get in the habit of doing a regular budget review. Understanding where every dollar goes will help you discover areas where you can cut spending more easily. Create a written list or spreadsheet, then update and analyze the information at least monthly and annually. Check with your credit union or bank—they may have online budgeting tools that can help you.
   

2. Track everyday spending—Once you know how much you typically spend, it's easier to adjust your spending to save money. Start with your groceries—make lists and set a specific amount to spend. After a few weeks, you'll figure out how much it takes to feed your household and you won't need to eat out at restaurants nearly as often.

3. Utilize technology—Technology is your friend when it comes to budgeting and saving money, but only if you stay away from unnecessary spending.

   Try a budgeting app. You Need a Budget (YNAB), for example, is the perfect app for people looking to pay off personal debt. For about $110 a year, YNAB helps you create and stick to a budget using your actual annual income. The app allows users to build a budget and follow it in real time. You can even create special budgets for the holiday season. Users also have access to online finance classes.

   Don’t forget about your own financial institution's mobile banking app. A good banking app allows users to securely check balances, view transaction history, transfer funds, locate nearby branches and ATMs and make mobile deposits anytime, anywhere. It may even give users access to online budgeting tools which let you track long-term savings goals, monitor all of your financial accounts, visualize your spending habits, track your net worth month-to-month and more. Also, budgeting calculators which are linked to your account may provide a clearer picture of how you are managing your budget.
   

4. Set goals you can meet and exceed—Make your budget successful by determining your why. Ask yourself why having money in the bank is important to you. Why is it better to feel financially secure than survive paycheck-to-paycheck?

   Most people determine they want to be financially secure so they can pursue passions post-retirement. If that includes you, consider filling out a retirement income calculator to determine how well you’re preparing. Improve your retirement outlook by evaluating your preparedness, changes in the economic climate, inflation, achievable returns and your unique personal situation.

If detailed budgeting is not your thing, there are simpler, more straightforward budgeting strategies that can help you reach your financial goals. First, try instituting the 50/30/20 budgeting guideline that suggests dividing your after-tax income to spend 50% on needs, 30% on wants and 20% on savings and debt repayment. Once you know how your income should be divided, try one of these easy budget plans:

• Zero-based budgeting—Every dollar of your income is assigned a specific purpose—such as expense, saving or debt payment—until your balance is zero.

• Envelope budgeting—Allocate a specific amount of money to various spending categories, often using cash in labeled envelopes (physical or digital), and stop spending once the envelope is empty.