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Financial Wellness

Budgeting 101

Budgeting is not just about saving money. It’s about taking control of your spending and determining exactly where your money is going. 

Research shows that nearly 60% of all U.S. households still don’t have a budget, and 11 million adults don’t monitor their overall spending and don’t know how much money they spend on food, housing, and entertainment. Nearly 77 million people gave themselves a grade of C, D, or F on their knowledge of personal finance. With those alarming statistics, it is more important than ever to start using a budget.

A budget is a financial plan that compiles and compares a person’s income against all of his/her expenses in order to analyze spending and meet personal goals. Because most people pay their expenses on a monthly basis, it is recommended that you create a budget based on your monthly income. If you prefer to make a yearly budget, this is okay too.

Creating a Budget

Step One - Income

The first thing you need to do is figure out how much income you have. Most people’s income primarily comes from their employer and you have less control over this part of your budget. Other sources of income could include gifts, tax refunds, and proceeds from a sale. Don’t forget to add everything you expect to receive in a given month.

Step Two - Expenses

This is the part of your budget you have more control over because you are the decision maker. When evaluating your expenses, determine needs vs. wants. While there is nothing wrong with buying the things that you want, higher priority must be given to the things you need. 

Step Three - Do the Math

Once you have determined your income and expenses, subtract your expenses from your income. You should have money left over. If you don’t you will need to take a closer look at your varied expenses to see where you can cut some costs.

Types of Expenses

Fixed Expenses

These are the types of monthly expenses that are always the same amount. While these types of expenses make calculating our budget easier because we know what to expect, they can also make it difficult because we have less control over them. Some examples of fixed expenses are car payments and mortgage loans.

Varied Expenses

Unlike fixed expenses, varied expenses can change from month to month. These are the type of expenses we have more control over. We can increase or decrease the amounts depending on our budgeting needs. Some examples of varied expenses are food/groceries, utilities, and gas.

Periodic Expenses

Although you don’t have these types of expenses on a monthly basis, it is important to still figure these in your budget as a monthly expense to ensure you have the money when the bill is due. Some examples of periodic expenses are car insurance and personal property tax.

Unexpected Expenses

Unexpected expenses sometimes occur. This is why it is very important to have a savings account for those unexpected expenses. Most financial advisors recommend that you save 10% of your monthly income. If you can’t afford 10%, you can start off with a lesser amount and work your way up to this percentage. The amount isn’t necessarily as important as getting yourself into a habit of saving a portion of your income for emergencies or unexpected expenses. Some examples of unexpected expenses include medical bills, car repairs, and home repairs.

Ways to Help your Budget

Making simple changes in your life can often cut your spending by significant amounts in several key categories.


  • Save eating out for special occasions and make your own meals at home.
  • Plan your grocery store purchases by using a list.
  • Join grocery store membership clubs that qualify you for automatic discounts.
  • Take your lunch to work, rather than eating out every day.


  • Look for sales rather than paying full price.
  • Shop at consignment and thrift shops.
  • Sell clothing you no longer want or wear at the consignment stores or rummage sales to recapture some of its cost.


  • Combine your trips when you run errands.
  • Use public transportation if it’s available in your community.
  • Perform timely car maintenance to reduce repair costs.


  • Look for telephone, cable, cell, internet bundles that offer considerable savings for using multiple services from a single vendor.
  • Look for the “Energy Star’ symbol when buying appliances or light bulbs to spend less on electricity and qualify for rebates from many power companies. Figure the payback period of appliance purchases to determine where you are truly achieving savings.
  • Turn off anything that isn’t in use, ranging from the air conditioner to overhead lights.


  • Borrow books, CDs, and DVDs from the library instead of buying them.
  • Pare down or cancel your internet, smart phone, cable, or satellite bill.
  • Meet friends for weekly walks or low cost craft sessions instead of shopping or lunch.


  • Consider the size and type of home that best meets your needs, which can include an apartment, condo, duplex, or single-family home. Many families have a bigger house than they need.
  • Consider sharing your home to reduce expenses. If an older member of your family is looking for company or your home is too large for your needs, you may be the perfect match. In a University town, you may be able to rent a room for short term to international students.
  • Learn to make basic repairs and renovations yourself. Almost anyone can paint or wallpaper a room.


  • Pay bills online to save on postage. Many credit unions offer free online bill payment.

Increasing Income

Increasing income is another way to reduce financial problems, although it can depend on economic conditions, job skills, family conditions, and other factors. Many people probably have a surprising number of options for increasing income.

Work Overtime

At some companies, workers can request overtime work or volunteer for extra assignments.

Take a Second Job

This can be difficult to balance in the households with children, but there are always options. Some adults opt for second jobs at department stores that offer employee discounts on clothing or other purchases to help stretch their budgets.

Sell Something

If you can no longer afford to own a boat, selling it can reduce your debt and bring flexibility to your budget. If you have a hobby that creates attractive items that others would be willing to pay for, consider selling them at a craft fair or a rummage sale. Clean out your house and sell unwanted items at a yard sale for vacation money.

Set Long-Term Goals

While it may not be possible to boost your income now, creating and following a spending plan can make it possible to change your circumstances to fund the pursuit of long-term goals, such as additional job training, higher education, or even relocating to another part of the country.

Additional Resources