A monthly budget provides a clear picture of where your money is going and can help you set guidelines on spending on current expenses and saving for your future financial goals. Whether you’re a first-timer or just looking for some extra guidance on ways to tackle your finances, these tips can help you get on track.
Understanding your financial situation
Before you set a budget, you need to understand how much money is coming in (your income) and how much is going out (your expenses).
How to calculate your monthly income
First, you need to know your net monthly income. This is your take-home pay each month, not your total salary — an important distinction when figuring out how much you can spend. If you have additional income from side gigs, investments or other means, be sure to include that as well.
Track your spending
Next, determine how much you’re currently spending. Separate and track your “wants” and “needs”. If you don’t already record your expenses, look at the past few months of bank or credit card statements as a starting point.
Read more: Want to track your spending more easily? Try Ally Bank’s spending buckets
Setting your financial goals
Now that you have an idea of your current financial picture, it’s time to turn to the future. What are you planning to put your money toward? You can save for multiple goals at once, including:
Short-term goals: These are things like a summer concert festival, holiday gifts or a tech upgrade.
Long-term goals: What bigger ticket items are on your list? Are you saving for a down payment or planning a dream vacation?
Tools like automatic savings transfers can make working toward these goals easier. And by giving each target its own savings bucket in an Ally Bank Savings Account, you can track and manage your goals in real time.
Building your budget
It’s time to create your budget. No two are exactly the same, so take your time to pick a method and tools that work for you, and your partner or your family.
Select a budgeting method
One of the most common budgeting methods is the “50/30/20 rule.” This popular money management plan says you should spend 50 percent of your pay on needs, 30 percent on wants and put the remaining 20 percent toward savings and debt. While 50/30/20 may be a good place to start, it’s not the only option. Review our free budgeting templates or take a quiz to determine your ideal budgeting style.
Create a monthly budget plan
Review your current spending habits and future goals, then use a critical eye and note where you might be overspending on things you don’t need (or even want). Strategize how you can modify your behavior to reduce these unnecessary expenses.
Don’t panic if your current financial picture doesn’t align with your ideal plan — that’s exactly why a budget can be so useful.
Pairing how much you spend with established guidelines can be a helpful way to identify where things are on track and where you need a little extra focus.
Maintaining and updating your budget
Now that you have your budget created, here comes the hard part: sticking to it.
Review regularly
One easy way to track your expenses is to use spending buckets, a feature of Ally Bank’s Spending Account. If you map out your fixed expenses with spending buckets, you’ll be able to clearly see how much is going where — and what’s leftover. The remaining amount can go toward savings or paying off debt.
Adapt as needed
Be sure you don’t forget your budget once you set it. Any time your finances or circumstances change, go through the process again to see how your income compares to your expenses and your future goals, then adjust as necessary.
Budgeting made easy
Budgeting doesn’t have to be complicated or intimidating. Pairing how much you spend with established guidelines can be a helpful way to identify where things are on track and where you need a little extra focus.
