Budgeting

A budget is a great tool to help you manage your money, prioritize spending, and save for future goals. Learn more about how they work and create yours today!

Budgeting for Success

A budget is a financial plan that outlines income and expenses for a specific time frame. Household budgets typically cover a 30-day period, as most major bills are paid monthly. It helps you make more informed decisions and shows: 

  • Whether or not you are saving enough 
  • Areas where you may be overspending
  • If you are making progress towards your financial goals
     

How to Create a Successful Budget

For some, calculating monthly income can be tricky. The guide below can help. For your budget use your net pay, or earnings after taxes and deductions, since this is the amount that you actually get to “take home”.

  • Biweekly: Paid every other week (26 times/year). Multiply take-home pay by 26, then divide by 12. Example: You’re paid $2,500 every other week. $2,500 × 26 = $65,000 ÷ 12 = $5,416.66/month.
  • Twice Monthly Pay: Paid twice a month (24 times/year). Multiply take-home pay by 24, then divide by 12. Example: $2,500 × 24 = $60,000 ÷ 12 = $5,000/month.
  • Nonstandard Pay: For irregular pay (e.g., seasonal work or commission). Use your annual salary to calculate monthly income. Example: your annual take-home pay is $60,000, and you are paid 10 months of the year, or $6,000 a month for 10 months. To annualize this divide $60,000 by 12 to get your true monthly salary of $5,000 per month. To ensure you do not experience a “pay gap” subtract your annualized monthly salary from your pay and save the difference for the two months that you will not receive a paycheck. In the example above that would mean you should save $1,000 per month.
  • If your pay fluctuates, base your budget on historical averages and use bonuses or commissions to boost savings.

Account for different types of expenses, including:
 
Fixed Expenses: usually do not change from month to month. Common fixed expenses include rent/mortgage, car payments, and set monthly bills like internet/cable. 

Flexible Expenses: typically fluctuate in frequency and/or amount. Common flexible expenses include groceries, gas, and utility bills. To determine the monthly costs for these items, track your spending in each category for at least 3 months and divide by 3 to find the monthly average. 

Periodic Expenses: cover a set period (quarterly, annually, semi-annually). These should be converted into a monthly number so you can plan for them in your budget. Example: your auto insurance is $1,200 a year, take $1,200 ÷ 12 = $100. Include a monthly expense of $100 for auto insurance in your budget.
 

One key purpose of creating a budget is to help you reach your financial goals. Treat them as an "expense" in your spending plan to ensure you're prioritizing and working toward achieving them. 

Set SMART Financial Goals

Consider both short- and long-term financial goals. Make them Specific, Measurable, Achievable, Relevant, and Timely. For example, instead of saying you want to save "some money" for a trip, research the total cost. Then, divide that amount by your timeline to set a precise savings goal. If your trip costs $1,200 and you're traveling in 6 months, divide $1,200 by 6 = $200. Add the $200 as a monthly expense in your budget. 

While everyone's financial goals differ, two essentials are:

  • Emergency Fund: Set aside 3-6 months' worth of living expenses for unexpected costs like medical bills, car repairs, or job loss.
  • Retirement: Aim to save at least 20% of your income, along with employer retirement plans and Social Security, to secure your financial future. 
     

Once you have calculated your income, expenses, and goals, pull them all together and create your spending plan using one of the formats below. Review your numbers and adjust spending or possibly add income to help you reach your goals if necessary.  

  • Online: There are a plethera of online budgeting apps available to help you create and manage your budget. Many of these link directly to your financial accounts, so be sure to vet carefully. 
    You may also want to review options where you currently bank, as most online banking platforms have budgeting tools built in. For example, those who bank with us can take advantage of Financial Tools in online banking for FREE. 
  • Excel: Microsoft offers a variety of budget templates that you can customize to match your needs. 
  • Paper: Prefer a more traditional method? Print this PDF and get started.