Maintaining personal finances can be challenging for many of us. It takes a special kind of willpower — plus some specific knowledge — to understand how to keep spending under control, save money intelligently and set yourself up for financial health for years to come.

Perhaps the most essential tool — and the best starting point for a healthy financial life — is the budget. We’ve all heard about them and maybe even tried to make one for ourselves at different points, with varying degrees of success. But creating a budget you can stick to is more than just writing some numbers down on a sheet of paper and trying to stay under the limit. It takes some research, a good understanding of how much money comes in and where it goes, and some honest accounting about your actual needs versus wants.

Gather information

To make a realistic budget for yourself, you need to understand your current spending levels. You can’t just guess and hope for the best. So when you set out to make a budget, gather up all of the paperwork that shows your income and expenses. This includes pay stubs, tax forms, bills, loan statements, investment paperwork and receipts. Today, some banks allow you to download your spending history into a spreadsheet, so if you’re able to use such a tool to get a complete look at where your money goes, that can be a timesaver. Just make sure you have all the information you need to make educated decisions.

Get out the calculator

Using all the documents you collected, figure out your monthly income, starting with your net income from your job. This is the take-home pay you receive after taxes. Add in any side income from things like investments or gig work. Then, make a list of all your expenses and add them up in each category.

Fixed vs. variable

Once you’ve figured out your expenses, you need to categorize them. Fixed expenses are the same every month, like a car or house payment. These are usually expenses that must be paid to meet basic needs, but you should also include regular credit card payments if you make them in the same amount every month. Additionally, if you want to save a certain amount every month, treat that as a fixed expense. Variable expenses are those that change from month to month. Some are optional, like entertainment or dining out, while others, like purchasing groceries or filling up your gas tank, are not.

Make adjustments

Once you’ve established all the existing facts, you can start to make changes for future spending. If your expenses are higher than your income, for example, look for ways to reduce your spending, like cutting down on optional shopping trips or reducing streaming services or other subscriptions. Or, if you want to save up for a specific purchase or an emergency fund, look for places where you can cut spending in favor of saving. Write these down and check your math to ensure it adds up correctly.

Maintenance is key

Unfortunately, a budget is not a set-it-and-forget-it tool. You must keep track of your spending throughout the month and track your expenses in your outlined categories. Technology can help here, especially in the form of the many budgeting apps that are available on your phone. These tools vary in complexity and effectiveness, and some require a subscription fee, which you must budget. Still, they can be beneficial in remembering to track spending or staying on track when temptation comes along. Some of them will also help you do the math and create categories.

Budgeting isn’t a fun activity for most people. Still, once you have created your budget and get in the habit of sticking to it, you’ll find that you enjoy the financial freedom of knowing exactly what you can spend each month without stressing over whether you can afford it. You’ll also make more mindful decisions and create a healthier financial ecosystem overall.

The team at Bank of Sun Prairie is pleased to offer this information through our partnership with Madison Minutes. Our Financial Fitness Center offers 50+ digital short courses in English and Spanish. Visit us in Sun Prairie and Cottage Grove today or bankofsunprairie.com. Serving Greater Dane County and beyond.

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