Tips for Making and Living with a Budget


When you live and spend without following a budget, it can be easy to lose track of how much you are spending and what you are spending it on. Creating and following a budget can make it much easier to prioritize the things that money needs to be used for urgently, and to make sure you aren’t spending more than you can afford. Making a plan for how you’re going to spend your money in a month can be intimidating, but it actually takes much less effort to create a budget than you think.

The first step for creating a budget is to calculate your “net income” for the month. Net income simply means how much money actually gets to you after taxes, automatic deductions for things like insurance, and money spent on your business if you have one.

Next, you have to calculate your expenses. These expenses will be everything from insurance payments not paid through your job to groceries, gas, and to eating out at restaurants. Add all of these together to find your total expenses for a month. It is important to keep in mind that each individual month might not be the exact same because of payments you have to make every other month or because of normal changes in spending. To get a better idea of how to budget from month to month you can take an average of several months.

Now that you have your income and your expenses, you have to subtract your expenses from your income. If you get a positive number, that’s good! That means that you are making more money than you are spending, and you will now have extra money to put towards paying off debt faster or towards savings or investments. If you get a negative number, you will still be okay, but it does mean that you will have to try to find items in what you spend your money on that can be cut out of your routine or reduced. It is unsustainable to spend more than you make over a longer period of time.

Now that you have all this figured out, you just need to continue to keep track of your expenses and your income every month. This will make sure you stay on track with how much you should be spending in each category, and show you how your spending habits are changing. There are services, both free and paid, online that will help you with both these initial calculations and with the continuing tracking. We also have a budget toolkit on the Resources Page of our website to help you get started at https://www.massdebtrelieffoundation.org/wp-content/uploads/2019/05/Building-A-Budget.pdf

If you have questions about budgeting, or how to prioritize what to spend on like debt, The Massachusetts Debt Relief Foundation is here and happy to answer questions.