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2/25/2019

5 Steps to Creating a Budget

Achieving your financial goals shouldn’t feel impossible. Whether you’re saving for a big purchase or just getting a handle on your daily finances, budgeting can kick start your progress. Creating a budget that works for your expenses and lifestyle preferences is straightforward with a few guidelines. With a budget in place, you can keep track of how much you're spending each month and stop yourself from living beyond your means (and ultimately, stressing out).

Practicing better money habits is just five steps away.

  1. Identify your net income – Planning how much you should be saving and spending each month starts with your after-tax income. Include what you take home from your primary job along with any earnings from a side job or hobbies. Don’t forget - factor in automatic deductions for any 401(k) savings, health or life insurance, and tax or business expenses for an honest picture of the cash you’ll take home. 
  2. Examine and track your spending – Next, put your spending habits under a microscope. Go old fashioned with a pen and paper, or use a spreadsheet or budgeting application to track your expenses. Note the areas where you're spending and record how much. After tracking your budget this way for a month or more, analyze your typical behavior. Ask yourself if you’re spending a lot on things that aren't meaningful to you, like eating out or streaming services. If the answer is yes, it’s time to choose where to cut down or how to reallocate your spending.
  3. List your short- and long-term goals – Before you leap forward into creating your budget, list out the short- and long-term goals you hope to accomplish. These could be milestones you plan to reach in one year or 20 years from now. Don't worry, your goals are flexible. This is just a starting place for your financial priorities. You can always make updates as time goes on. Knowing your goals will help you choose a savings method and provide support for your spending choices. Example: If you want to buy a new car in two years, you could choose to open a CIT Bank high-yield savings account such as Savings Builder, money market account or CD to grow your savings for that length of time by taking advantage of high interest rates. 
  4. Create and implement a budget – With your spending analysis and list of goals in hand, you’re ready to develop a budget. Start by establishing wants versus needs. One example: Utilities for your apartment are a need, but your cell phone plan might be a want. You can decrease your bill by cutting down on your data plan or considering an older model phone. Think about other services or habits where you can create savings to meet your goals. Try using a savings calculator like the one CIT Bank offers to tackle the specific financials. Made some decisions? Now you can outline your budget guidelines and prepare to track yourself moving forward.
  5. Review and adjust as needed – Your budget is not a "set it and forget it" item. You need to regularly check in to see how you're tracking toward your goals, especially as your priorities and financial circumstances change (like getting a raise or deciding to start a family). Achieving the life goals you've set is a continuous process. Keep moving forward by revisiting your budget every so often and making changes as needed.

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