How to Create a Budget That Actually Works

Step 1: Track Your Income and Expenses

Before you can create a budget that will work for you, you first need to know what’s going on with your money. Spend one month writing down every financial transaction you make. Every withdrawal from your checking account and deposit into a savings account should be noted. Even cash purchases for under a dollar at the office vending machine need to be noted.

Step 2: Separate Your Income and Expenses

Once you have a month’s worth of income and expenses, separate them so you can see a big picture of your financial transactions. Place every transaction into one of four categories:

• income
• necessary expenditures (e.g. gas and groceries)
• discretionary expenditures (e.g. outings and television subscriptions)
• financial goals (e.g. paying down debt and saving for the future)

Step 3: Draw Up an Initial Budget

You should now have a picture of how you made and spent money in the last month, which you can use to draw up an initial budget for the next month. Write down each broad category on a sheet of paper, and record how much you spend on each category next month. You may need to make a few adjustments if you had an unusual one-time expense, such as replacing a laptop or phone last month or will have one this month.

Step 4: Adjust Your Budget

You’ll likely need to make some further adjustments to your budget before it’s finalized. Add up your necessary expenditures, discretionary expenditures and financial goals categories. This total should be equal to or less than your income. If it’s not, you’ll need to make changes until it is. Depending on your draft, you might want to:

• increase your income through extra work
• look for ways to save on your necessary expenditures
• cut discretionary expenditures
• slow down your financial goals

Step 5: Set up Automatic Payments

With a budget in place, set up automatic payments for everything you can. These will help you with most expenses, and you can follow the other budgeted expenses yourself.

Members of Oklahoma Central can set up automatic bill payments using Bill Pay in Online Banking.

Once you have a budget that balances your income and expenditures, you should have one that will work for you. With auto pay in place, you’re well on your way to what may be your best financial month ever.