Basic Budgeting Skills - University of Southern Indiana (2024)

Tips for Maintaining a Successful Budget

Budget Each Month

In order to be the most efficient and responsible consumer, it is important to dedicate time at the beginning of each month to create your budget. It is extremely unlikely that your first month's budget will be perfect, but do not feel discouraged. At the end of the month, look over your budget, decide where errors were made, and correct those for next month.

Stick to Your Budget

One of the most important aspects of budgeting is being able to stay on track with your budget. If you budgeted one night a week to eat out, then do not be tempted to go out with your friends if you have already spent that money. One of the best ways to keep track of this is to get out the money you plan on spending and put it in envelopes labeled with specific categories. Once the envelope is out, then you do not spend any more money in that area.

Know Your Income

One individual's income is highly unlikely to be the exact same as another individual's. It is important to know where all your sources of income come from. Is your income irregular or does it generally stay the same? Is there any reason that your income might change suddenly? These are important questions to ask yourself when creating your budget.

Essential vs. Nonessential Expenses

That cup of coffee that you get every day can be nice, but so is being able to eat lunch. The essential expenses like food and shelter are the ones that you absolutely need to live. Designer clothes and coffee are examples of nonessential items. This list of items can be great to go back to if you need to figure out where to cut costs.

Fixed vs. Variable Expenses

Phone bills and rent can generally be considered fixed expenses. This is because the amount you pay does not change from month to month. Items like clothing and gas vary depending on the month. If it is a month you know you are going to drive home more, then be sure to budget accordingly for that.

Income - Expenses = Zero

When creating your budget, make sure that your expenses do not exceed your income. If they do, figure out where you can make some cuts in your expenses or increases in your income. A budget is possible with any income, you just have to be willing to make the necessary changes in your lifestyle.

Emergency Fund

Emergencies are going to happen when you are least expecting them. The best thing that you can do is be prepared for when they do happen. Start putting a set amount and any extra money you have at the end of the month into a savings account. This account is meant to be used for emergencies only! This can relieve the immediate stress that comes from unexpected events like flat tires or a sudden job loss.

Learning to Say No

One of the hardest things to learn when budgeting is being able to tell ourselves and others no. We live in a world where debt is a fairly normal concept and is almost expected of us. Don't be afraid to tell your family, friends, and even yourself no when it comes to spending money you don't have. You may find it frustrating at first, but you'll thank yourself later when you can pay the bills and have a little money left over.

Basic Budgeting Skills -  University of Southern Indiana (2024)


What are the 5 basics to any budget? ›

What Are the 5 Basic Elements of a Budget?
  • Income. The first place that you should start when thinking about your budget is your income. ...
  • Fixed Expenses. ...
  • Debt. ...
  • Flexible and Unplanned Expenses. ...
  • Savings.

What are the basics of budgeting? ›

Key components of a budget include sources of income, as well as fixed and variable expenses. Your first step is to document how money is coming in and going out every month. Start by tracking your income and expenses for 30 days to get the full picture.

What are the 7 steps in the budget process? ›

Budgeting Basics: 7 Steps to Building Your First Budget
  • Why is Budgeting Important? ...
  • Define Clear Financial Goals. ...
  • Digitalize Your Expense Tracking. ...
  • Calculate Consistent Monthly Income. ...
  • Categorize and Analyze Expenses. ...
  • Craft and Fine-tune Your Budget. ...
  • Regularly Update Your Strategy. ...
  • Prioritize an Emergency Fund.

What are the 5 steps of the budgeting process? ›

How to create a budget
  • Calculate your net income.
  • List monthly expenses.
  • Label fixed and variable expenses.
  • Determine average monthly costs for each expense.
  • Make adjustments.

What is the 50 30 20 rule? ›

The 50/30/20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should be split between savings and debt repayment (20%) and everything else that you might want (30%).

What are the 4 simple rules for budgeting? ›

What are YNAB's Four Rules?
  • Give Every Dollar a Job.
  • Embrace Your True Expenses.
  • Roll With the Punches.
  • Age Your Money.
Jan 3, 2023

What is the 40 40 20 budget rule? ›

The 40/40/20 rule comes in during the saving phase of his wealth creation formula. Cardone says that from your gross income, 40% should be set aside for taxes, 40% should be saved, and you should live off of the remaining 20%.

What is the 50 40 10 rule? ›

What is 50 / 40 / 10 rule, how to use it and is the rule is good for you? The 50/40/10 rule budget is a simple way to budget that doesn't involve detailed budgeting categories. Instead, you spend 50% of your after-tax pay on needs, 40% on wants, and 10% on savings or paying off debt.

What is the 50 30 20 rule for 401k? ›

50% of your after-tax income (take-home pay) covers needs. These are essentials, such as housing, food and transportation. 30% covers wants, which can range from dinners out to vacations to charity. 20% covers debt repayment and savings, such as retirement contributions and credit card payments.

What does a good budget look like? ›

We recommend the popular 50/30/20 budget to maximize your money. In it, you spend roughly 50% of your after-tax dollars on necessities, including debt minimum payments. No more than 30% goes to wants, and at least 20% goes to savings and additional debt payments beyond minimums. We like the simplicity of this plan.

What is a realistic budget? ›

Setting budget percentages

That rule suggests you should spend 50% of your after-tax pay on needs, 30% on wants, and 20% on savings and paying off debt. While this may work for some, it's often better to start with a more detailed categorizing of expenses to get a better handle on your spending.

How to make a good budget? ›

Here are steps you can take when making a budget to ensure that it fits your lifestyle and financial goals.
  1. Determine Your Income. ...
  2. Calculate Your Monthly Expenses. ...
  3. Set Realistic Goals. ...
  4. Track Your Spending. ...
  5. Pick a Budgeting Plan. ...
  6. Stick to Your Budget. ...
  7. Above All Things, Remember Your Goals.
Jul 13, 2023

How to create a budget for college students? ›

Creating Your Budget
  1. Determine a Time Span for Your Budget.
  2. Choose a Tool to Help You Manage Your Budget.
  3. Review Your Monthly Income.
  4. Identify and Categorize Your Expenses.
  5. Save for Emergencies.
  6. Balance Your Budget.
  7. Maintain and Update Your Budget.

What is a key priority when budgeting? ›

Priority-driven budgeting starts with the revenue available to the government, rather than last year's expenditures, as the basis for decision making. Know the True Cost of Doing Business. Focusing on the full costs of programs ensures that funding decisions are based on the true cost of providing a service.

How to budget $4000 a month? ›

making $4,000 a month using the 75 10 15 method. 75% goes towards your needs, so use $3,000 towards housing bills, transport, and groceries. 10% goes towards want. So $400 to spend on dining out, entertainment, and hobbies.

What are the 3 basic concepts of a budget? ›

There are three broad activities involved in the budgeting process for any organization: 1) identifying costs, 2) identifying revenues, and 3) evaluating the financial dimensions of projects or investments. These activities provide the necessary background information needed to make reasonable and realistic decisions.

What are the 3 R's of a good budget? ›

1) Reality-"Do I need this?" 2) Restraint-"Can I wait to have this?" 3) Responsibility-"If I buy this, will I stay in my budget?"

What are the three basics of budgeting? ›

The basics of budgeting are simple: track your income, your expenses, and what's left over—and then see what you can learn from the pattern.


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