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The Basics of Successful Budgeting
Secure your financial future with these basic budgeting steps

If you’re clueless about where your money goes each month, you cannot create a financially stable present let alone plan for a healthily funded future. The following budgeting basics will help you garner a more complete picture of your finances, take control of your spending and plan your investments.

Follow the money trail

It may feel like your money just disappears, but it’s definitely going somewhere. You just need to pay attention to the specifics.

“The only way you can create an effective budget is if you first track your expenses for at least a month,” reports Bankrate.com writer Sarah Berger. “You need to get a good grasp on what your typical spending and saving habits are already like, so that when you do create a budget, it’s one you can realistically follow.”

Create a robust budget

Determine an all-encompassing plan — one that incorporates the bills you have to pay and plans for the things you want both now and in the future. Think potential vacations, an emergency fund and even retirement, advises NerdWallet.com writer Bev O’Shea.

According to Berger, your budget should be divided into three categories: future, essentials and discretionary spending. Your take-home pay should be divided among these areas by specific percentages: 50 percent to essentials, 20 percent to future and up to, but never more than, 30 percent in the discretionary spending section.

“Essential expenses should include four main categories: housing, transportation, groceries and utilities,” says Berger.

Rectify past mistakes

Debt is a small word for a menacing beast. Whether it’s debt from credit cards, a mortgage, or car and school loans keeping you up at night, your debt needs to be factored into your budget, explains Berger. Although it is intimidating, she advises strategizing ways to whittle down expensive debt like high-interest credit cards first.

“If you do have a ton of debt, you’re not doomed. But you should switch your budget up and put 30 percent of your take-home pay toward financial obligations and 20 percent toward discretionary spending,” advises Berger.

Simplify the process

Good intentions don’t usually manifest successful results, especially when it comes to money. If you want to really save for the future, outsource the process.

“The easiest way to start socking away cash for your future self is to automate those savings. That way, you won’t even have to feel the pinch in your paycheck; if you don’t see it, you won’t miss it,” writes Berger.

Since there is strength in numbers, O’Shea recommends enlisting the willpower of a trusted accountability partner or the support of an online group who can keep you focused on your financial goals when something shiny (and expensive) threatens to derail your healthy financial trajectory.

Keep it moving

Stagnant water breeds bugs and mosquitoes, pests you don’t need in your life. A stagnant budget breeds financial death, a situation you had best avoid.

“Your income, expenses and priorities will change over time. Adjust your budget accordingly, but always have one,” advises O’Shea.

Navigating your finances is no small undertaking, but by establishing a thorough budget with these basic steps, you’ll have a clearer understanding of what you have, what you need and what you want your financial future to be.


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Published by East Boston Savings Bank
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All content contained in this newsletter is for informational purposes only and should not be relied upon to make any financial, accounting, tax, legal or other related decisions. Each person must consider his or her objectives, risk tolerances and level of comfort when making financial decisions and should consult a competent professional advisor prior to making any such decisions. Any opinions expressed through the content in this newsletter are the opinions of the particular author only.  


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