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Create a Budget to Help You Prioritize Spending

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Smart budgeting can help you achieve lots of things worth getting excited about. A budget can help you gain more control over your financial future by helping you put funds toward your top priorities

“The power of a budget is it puts you in front of all your bills, responsibilities and goals,” says Mark Butler, director of outreach for YouNeedaBudget.com, a Lehi, Utah-based personal budgeting software company. “You look into the future, look at what has to happen, and look at the money that you currently have, and match it up to the ‘jobs’ that it needs to do.”

How to create a budget

While there are many ways to approach budgeting, the following strategy can help you figure out whether your budgeting goals and spending habits align.

1. Track your earnings for 30 days:

  • Look at your paystubs from the past month.
  • Add any extra income you expect to earn in the next 30 days.
  • These two numbers give you an idea of how much you’ll make in the next month.

2. Track your spending for 30 days:

  • Keep track of everything you spend—from cab fare to that pack of gum you purchased.
  • Each day, record the price of everything you spend in your smartphone, memo book or on an index card.
  • Take advantage of online banking options—for checking, savings and credit cards—that help you monitor money you’re spending in real time.

3. After 30 days:

  • Make a list of all your expenses. wikiHow has a great example of how to organize this type of list.
  • Then, fill in what you actually spent in the budget categories.
  • Account for your major expenses first. Then fill in the rest.
  • Try to identify spending on wants vs. spending on needs.
  • If you’re spending more than you would like, try to reduce the amount of money you spend on “wants” the next month.

Prioritize your bills

When it comes to your needs, prioritization can also be helpful. “The order in which you pay bills can really give you a handle on budgeting,” says Gail Cunningham, vice president of membership and public relations for the National Foundation for Credit Counseling in Washington, D.C.

She says it’s helpful to prioritize bills in this order, though individual circumstances are unique:

  1. Living expenses, such as rent or mortgage
  2. Food
  3. Utilities
  4. Insurance payments
  5. Medical
  6. Clothing
  7. Gasoline

“You need to keep a roof over your head, food on the table and the utilities on because that keeps your home life stable,” she says. Cunningham says housing should cost no more than 30 percent of your take-home pay, and debt—including your car payment—no more than 20 percent.

Budgeting helps you match your priorities with your spending habits so you feel good about your choices at the end of each month. Whether you want to save money for a vacation, a home down payment or a car, you’ll be in control of your finances instead of letting monthly bills and impulse buys shape your financial future.

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.


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