How to Build a Budget

  1. Figure out your after-tax income. If you receive a check or direct deposit on payday, the amount you receive is probably it. For any other type of income, you should use the amount left after business expenses and taxes have been subtracted. Use our Home Budget Analysis calculator to help calculate your after-tax income, if needed.
  2. Identify your needs. Groceries, mortgage/rent, insurance, transportation, childcare (so you can work- not for date nights), utilities, other bills, and minimum payments on debt should all be included. A good rule of thumb is for your needs to not exceed 50% of your after-tax income. If your absolute necessities overshoot the 50% target, you’ll have to take from the ‘wants’ portion for a while or adjust your spending.

    Shopping around for a better rate on your cellphone plan, mortgage, car loan and/or insurance can also help adjust your spending and should be done periodically to help you save money and pay off debt faster. Check out our mortgage calculator and car loan calculator to see how much a lower rate can help you.
  3. Define what’s left for wants and savings. If you’re close to the 50% target for your necessities, the 50/30/20 rule would suggest 30% for wants- Typical wants include things like dinners out, travel, gifts, concert and movie tickets, monthly subscriptions, annual passes to the swimming pool, etc.

    The remaining 20% should be committed to saving for emergencies and the future, as well as additional payments toward debt. Look at the bigger financial picture- if you could get rid of your debt faster, by cutting back on some of your ‘wants’ now, you’ll have more money to allocate to your wants and savings in the future. Use our credit card payoff calculator to see how extra payments can help you hit your goals more quickly.

    Remember, your budget is a tool to help you stay on track with your spending. If you don’t leave any money to ‘spend as you wish’ you’ll be more likely to suffer from “budget burnout” and not stick with your budget (accusing it of ruining your social life).
  4. Automate your savings. It’s proven that people are more successful when things require minimal effort on their part. Allocate all your dollars and automate as much as possible to keep you accountable to your goals. Recurring transfers from checking to savings can easily be set up through Frontier Bank’s free online banking.
  5. Track your progress. Use an app, spreadsheet, notebook- whatever method works best for you to continually monitor your progress. Set milestones that come with rewards when hit- just make sure your reward doesn’t wipe out the emergency savings you just worked so hard to build!
  6. Revisit your budget as needed. Your budget is filled with numbers that are subject to change- income, needs, wants; so review where your allocating your dollars on a regular basis or at least when/before these changes happen to continue utilizing each dollar wisely.

 Tracey Hoefert

 Tracey Hoefert
Retail Services Manager



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