How to make a budget

Surprises are nice but not when it comes to your money. If you’re scrambling to pay the bills each month, you can probably benefit from having a budget. Below are three suggestions to help you organize and manage your monthly expenses. Choose a technique that works best for you.

Fixed and Flex

The first budgeting technique involves grouping your expenses into two categories.  They are:
  • Fixed - “must-haves” (e.g.,food, utilities and housing).
  • Flex - “nice-to-haves” (e.g.,dining out, movies and vacations).
With the “Fixed and Flex” technique:
  1. Gather six to 12 months’ of bank statements, receipts and other financial records.
  2. Separate your expenses into “Fixed” and “Flex.”
  3. Add up your “Fixed” expenses and subtract the total from your monthly income.
  4. What’s left over is your “Flex” spending money.

50/30/20 Split

Another budgeting technique is the 50/30/20 split.  It involves dividing your monthly income in three ways:
  • 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.
This 50/30/20 split is a guide and can be adjusted to suit your short and long-term goals.  Be careful about confusing “nice-to-haves” for “necessities.” Dining out multiple times a week and unlimited data plans may be nice to have, but they aren’t essential.


Tracking 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. When a category has no money left:
  • If possible, stop spending in that category, until you get your next paycheck
  • Consider making trade-offs by moving money around from other categories
Your money is stretched in many directions.  Daily expenses, entertainment, life events and long-term goals - all competing for the same dollar. Budgeting can help ensure you’re covering the necessary monthly expenses and maybe have some extra cash left over for dinner at your favorite restaurant.

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