How to Build a Budget: 12 Months to Financial Fitness



4 min. read

By: FCU Team

With January behind us, as well as a better understanding of our spending, it’s time to build the budget we’ll be using for the rest of the year.

Introduction to Budgeting

We touched on expenses in last month’s financial fitness blog, but it’s time to dive into the other important components of your budget: income and money left over. Your income is easy enough to explain: the money you have coming in every month. If you have a stable job where you work the same hours every week or are salaried, this should be easy to calculate.

Beyond just your job, make sure you take all other sources of income into account. These include bonuses, self-employment income, dividends and more. If you have sources of income that aren’t stable, it’s better to not rely on those for your expenses.

Now that you know your income and expenses (both fixed and variable), you can calculate how much money you spend each month as well as what money you have leftover. If you’ve focused on improving your spending habits since last month, you might have more money left than before!

If you find you can’t or barely have enough money to cover your expenses, it’s time to take a hard look at your expenses or find ways to make extra money. While this may be discouraging, take advantage of this opportunity to study your financial health and habits.

Budget Goals

With your income and expenses calculated, there’s a decent chance you’ll have some money remaining, especially if you’ve taken steps towards curbing your spending. You might be wondering what to do with this money, and ultimately, it’s up to the goals you have for your budget.

Some people want to focus on paying down debt, so they decide a certain amount will go toward doing so and make sure to include it in their budget. The same is true for other goals, like saving for a new car or contributing money into an emergency savings fund. The best budget builders have almost every dollar and cent accounted for each month.

While you don’t have to be that specific, it’s a good idea to think ahead on what the goals of your budget are. We’d recommend you start with an emergency savings fund, as it’s a safety blanket for unexpected expenses. Aim for three to six months’ worth of your expenses but modify as needed.

Common Budgeting Methods

A good way to establish and achieve your goals is to adopt a budgeting method. We’ve previously touched on four common budgeting methods: zero-based, 50/30/20, envelope and values-based budgeting. Each is very different but offers its own benefits. We would highly recommend reading each and trying out whichever looks the most beneficial to you.

We know a budget might be a pain to set up at first. The benefit is that once it’s established and you’ve gotten some practice done, it’ll transform the way you manage your money, paving the way towards financial fitness.