Creating a monthly budget can seem overwhelming. But knowing why you are creating it can help ease budget anxiety and achieve your financial goals.

Start by knowing that a budget is simply a plan and not all plans will go the way you want them to. Sometimes you have to adjust your budget to achieve the results you want. A budget is also not a restriction on spending, it’s a plan on what you will do with your money. If you can, make sure to buffer in “fun money” each month — even if it is $20.

The key to a good budget is including as much information as possible so you can adequately prepare and plan.

Now, let’s learn to make a budget!

What Are Your Monthly Expenses?

Gather all your monthly expenses (ie credit card bills, utility statements, mortgage statement, etc.). Make a list of each and how much you pay per month. For bills that vary from month to month, use a monthly average. Don’t forget any annual bills or subscriptions that might be coming due.

How Much of Your Income Should Be Spent?

Rent or mortgage payments plus credit card obligations should not exceed 35-40% of your gross monthly income. The amount you owe on credit cards, monthly car payment(s), student loans, and other monthly payments should not exceed 10-15% of your take-home pay.

Put It In Writing.

Categorize your expenses. Tally up everything you spend money on. That includes your daily coffee or snacks, lunches, ATM withdrawls, and more.

Do the Math.

The last step is to total your expenses and subtract them from your monthly income.

Now What?

You have all your expenses and income written down, now what?

If Your Income and Expenses are EQUAL …

You are probably living paycheck to paycheck! Or, using credit cards to survive and paying only the minimums on them each month. If that is the case, cut your expenses. Rather than buying lunch each day, pack a lunch. Look at what services you subscribe to. Do you need several different streaming services? Are you paying for a subscription you do not use? If so, cancel it.

If You Have MONEY LEFT OVER at the End of the Month …

It’s time to start saving for your future! Maybe you want to buy a new home, retire early, or put a down payment on a new car. You can start saving for these goals by opening a personal savings account, personal money market, or purchasing a certificate of deposit. If you already have a savings account, set up automatic transfers to have a set amount moved directly from your checking account into your savings account each month. You can also up your contribution rate into your 401K.

If Your Total was Negative and You DON’T HAVE MONEY LEFT OVER …

Now is the time to start cutting your expenses! It is usually easier to cut back on expenses than increase your income. Analyze your budget to see where you can cut expenses. Personal or entertainment expenses are often the easiest to cut. Call your utility companies and set up a payment plan that is within your budget. Also, call your cellphone, cable, and internet providers to possibly find lower cost plans. If these options do not help, consider a debt counseling service to help you get back on track.

If you take time to think about what you’re buying, you’re more likely to make a choice that fits your budgeting goals. Here are a few questions you can ask yourself before making a purchase:

• Do I need this?
• Can I afford this item?
• Will this item go on sale? Should I wait to buy it?
• Do I need to save this money for a financial goal?
• If I buy this item now, will I still be happy that I bought it a month from now?
• Does it matter if I buy brand-name or can I get by with generic?

Remember, the best budget is the one that works for you! Take time to revise your budget monthly and adjust your spending as needed until you each your financial goals.