Budgeting is all about prioritizing what’s important to you. It isn’t a starvation diet. You don’t have to stop drinking Starbucks, learn to cut your hair, and only eat lentils. It comes down to what matters to you. Does that $5 Starbucks drink keep you sane when you’re having a long day? Or would you rather put it towards the latest tech toy? Maybe you’ve been dreaming about a vacation? By making a plan for your money, you can make sure that it’s going towards what’s important to you.

Step 1: Determine your monthly income.

  • When calculating your monthly income include every source of income such as paychecks, money from a side hustle, government and disability benefits, and alimony and child support.
  • Make sure you’re using the money you get to take home after taxes and deductions, your net pay, and not the amount of your salary, your gross pay.
  • If you are part of a couple that shares finances, include the other person’s income as well.

Step 2: List your fixed expenses.

  • Fixed expenses are bills that stay the same every month, like rent, car payments, insurance premiums, Netflix, etc. They tend to be fairly easy to track and budget for because they are so consistent.
  • Using a calendar, write down when these different bills are due. Generally, these days stay the same every month (like rent being due on the first), which can help you plan for having that money set aside.

Step 3. Track your variable expenses.

  • Variable expenses are ones that change from month to month or seasonally. This includes everything like groceries, clothing, going out to coffee or drinks, and recreational activities. Your heating, electricity, and water/sewer might also be variable depending on your payment plan.
  • Make a goal that for one month you will keep track of every penny you spend for one month. You’ll learn a lot. This will help give you an idea of what your average spending looks like so that you can have a starting place for your budget. If you use a debit or credit card for most purchases, you can find track your expenses by looking at your transaction history or by using MX in WECU online banking.

Step 4. Create a budget plan.

  • After looking over your month of tracked expenses, choose one area that you would like to change.
  • Put together a monthly expected budget that shows your income and all your expense categories. Use your past spending to predict how much you think you will spend on different things. Add in your desired change.
  • Keep track of your finances over the month. Once it’s over, look at your actual income and expenses. Are they what you expected? If so, great job! If not, why were they different? Do you need to adjust something moving forward to prioritize what’s important to you?