Budgeting is tracking and creating a plan for your income and expenses for a set period of time. It’s a helpful tool for understanding your money, but it can be associated with feelings of being restricted or limited. And some people struggle with feelings of shame and guilt when reflecting on how they spend money. When done productively, however, budgeting can be empowering, helping you feel more in control and confident that your finances are aligning with your values and goals.
If you’re having trouble getting started, try keeping the task short. Dedicate a certain amount of time each week to accomplishing the steps below. And try pairing your budgeting time with something you enjoy. Enjoy a treat, nice coffee or an activity once you’re finished with the task.
The first step in budgeting is to start tracking your income and expenses. Be sure to look beyond just monthly expenses, since some expenses are annual or semiannual (e.g., insurance premiums and credit card fees).
As you build your budget, you can decide how detailed you want to be. You can also start out simpler and then become more detailed down the road (or vice versa).
| Level of detail | Pros | Cons |
|---|---|---|
| Just total income and total expenses | Simple, quick, easy to maintain | Not much clarity in where you’re spending |
| Large spending categories Example: Needs, wants, savings, debt | Fairly simple and helps see the bigger picture of your spending versus saving | Still lacks detail to make specific changes, especially within the “wants” spending |
| Detailed spending categories Example: Housing, utilities, groceries, dining out, child care, entertainment, college savings | Provides very clear picture of where you’re spending and saving | Takes more time and work to maintain all the categories, which can make you less likely to stick with it |
| Combination of above General in some areas, detailed in others | Can be fit to your budgeting needs | If too general, may be missing something (e.g., one big “wants” category may make it hard to fine-tune spending) |
The table above represents the different approaches you can take toward building your budget. We've outlined four levels of detail — totals, large spending categories, detailed spending categories and a combination — and provided pros and cons for each. Use this table as a guide to help determine the level of budget detail you feel would be best for you.
Once you’ve picked a method and recorded your income and expenses, you can start to make changes to your target budget where needed. You may want to make changes so your spending is below your income and you’re on track to achieve your financial goals. Start by identifying which of your expenses are more flexible or not essential, to see where you can make changes first. Some options to consider include:
Ultimately, if you can’t make room in your budget, you may need to revisit and reprioritize your financial goals. A financial advisor can help you understand your options and the tradeoffs.
How often you monitor your budget is up to you. It can be each month, quarter or year. But you’ll want to check in periodically once you have your budget in place to make sure you’re staying on track. This may require small tweaks or adjustments. Did you miss any ongoing expenses in your initial budget, such as an annual subscription fee? Are there any expenses in your budget that are lower, higher or less frequent than you expected? Check to see whether there are new substantial sources of income or expenses that may require a full budget review.
There are times when you may need to revisit or even redo your entire budget. If you need to make large changes, this could mean an overhaul to the budget. Some events that would signal it’s time to review your budget are:
Tackling a budget with a partner can add complications. But getting on the same page can help you resolve tension and work together. Some tips for budgeting with a partner are:
Using these steps, you can create and maintain a budget with the amount of detail that best suits your needs. It should not only help you understand where your money is going but free you up to enjoy spending guilt-free while saving for future goals. After all, creating and maintaining an effective budget should be empowering rather than limiting. An Edward Jones financial advisor can work with you to review your current situation, refine your goals and help create a strategy to keep you on track.
