How to make a budget

Think of it as the heads-up you need to stay on top of bills and expenses – a budget, done 3 ways.

Surprises are nice, but not when it comes to your money. If you're scrambling to pay the bills each month, you would probably benefit from having a budget. Below are three methods for helping you organize and manage your monthly expenses.

Fixed and flex

The first budgeting technique involves grouping your expenses into two categories—"fixed," which are must-haves like food and utilities, and "flex," the nice-to-haves like a new watch or a day at the spa. Keeping these definitions in mind, follow the four-step process below:

  1. Gather 6 to 12 months of bank statements, receipts, and other financial records.
  2. Separate those expenses into "Fixed" and "Flex" columns.
  3. Add up your monthly "Fixed" expenses, then subtract the total from your monthly income.
  4. What's left over is your "Flex" spending money.

Although you're still dealing with the same amount of money, looking at your finances in a more organized way can help get your spending under control.

The 50/30/20 rule

Another budgeting technique is the 50/30/20 rule. It involves dividing your monthly income into three "buckets":

  • 50% (or less) goes to necessities such as housing, student loans, and utilities. These are expenses you have to pay every month.
  • 30% (or less) goes to nice-to-haves, such as entertainment, hobbies, and travel.
  • 20% (or more, if possible) goes toward savings and paying down debt.

You can adjust the 50/30/20 rule based on your short- and long-term goals, but be careful about confusing "nice-to-haves" for "necessities." Several dinners out each week and unlimited data plans may be nice to have, but they aren't essential.


TrackingOpens PDF takes the most time, but it provides the greatest insight into your spending habits.

Use a spreadsheet, an online service or, if you prefer to go "low tech," a notebook and pen will work just fine.

First, create columns for your spending categories (e.g., groceries, gas, utilities, medical, entertainment, and child care). Add a "miscellaneous/unexpected" and a "savings" category, as well.

Next, divide your monthly income among the categories and then pay your bills/save accordingly. It's important to list all items and subtract the amount you spend in each category, so you know where your money is going. Once a category is "out of money":

  • Stop spending in that category if possible, until you get your next paycheck
  • Consider making trade-offs by moving money around from other categories

You stretch your money in many directions. Daily expenses, entertainment, life events, and long-term goals all compete for the same dollar. Budgeting can help ensure you’re covering the necessary monthly expenses, saving for the future, and—maybe—have some extra cash to reward yourself for your good work.

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This material is for informational or educational purposes only and does not constitute fiduciary investment advice under ERISA, a securities recommendation under all securities laws, or an insurance product recommendation under state insurance laws or regulations. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on the investor’s own objectives and circumstances