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How to Create a Budget and Stick to it

By: Vignesh Nagarajan


Creating a budget is an essential tool for managing your finances, and sticking to it is crucial for achieving your financial goals.



how to budget


For many people, creating a budget can be intimidating, and sticking to it can be even more challenging. We'll show you some steps that you can take to create a budget and stick to it.


Why do we need a budget? A budget helps you decide:

  • what you must spend your money on

  • if you can spend less money on some things and more money on other things


The importance of making a budget is a financial lesson that cannot be overemphasized. If you and your family want financial security, following a budget is the only answer.


Now, let’s keep reading about the 6 steps that you can follow to create a good budget and take control over your financial future or watch this "How to budget" Tiktok video.


Step 1: Determine your income



how to budget


The first step in creating a budget is to determine your income. This can be your salary or any other sources of income that you have, such as hourly income or freelance work. It's important to be realistic and accurate in your estimation of your income.


The foundation of an effective budget is your net income. That’s your take-home pay—total wages or salary minus deductions for taxes and employer-provided programs such as retirement plans and health insurance. Focusing on your total salary instead of net income could lead to overspending because you’ll think you have more available money than you do.


Step 2: Determine your expenses



how to budget


The next step is to determine your expenses. This includes all of your necessary expenses such as rent or mortgage payments, utility bills, groceries, and transportation costs. It also includes discretionary expenses such as dining out, entertainment, and travel.


Building a budget forces you to take a close look at your spending habits. You may notice that you're spending money on things you don't need. Do you honestly need all of the items that are in your Amazon cart? Do you really need 30 pairs of shoes? Budgeting allows you to rethink your spending habits and refocus your financial goals.


Step 3: Identify your financial goals


Before you start allocating your income towards expenses, it's important to identify your financial goals. This could be saving for a down payment on a home, paying off debt, or building up an emergency fund. Whatever your goals are, make sure to write them down and make them a priority in your budget.


Step 4: Allocate your income





Once you have identified your income and expenses, it's time to allocate your income towards your expenses and financial goals. Start by paying your necessary expenses first, and then allocate a portion of your income towards your financial goals. After you have allocated money towards your financial goals, you can then decide how much money you have left over for discretionary spending.


Step 5: Track your spending


One of the keys to sticking to your budget is to track your spending. This will allow you to see how much money you are spending on each category and will help you identify areas where you may be overspending. There are many budgeting apps available that can help you track your spending, or you can use a simple spreadsheet to keep track of your expenses.


Step 6: Stay motivated



Sticking to a budget can be challenging, especially if you are used to living paycheck to paycheck. To stay motivated, keep reminding yourself of your financial goals and why they are important to you. Celebrate your successes along the way, and don't be too hard on yourself if you slip up.



Creating a budget and sticking to it is essential for achieving your financial goals. By following the steps outlined above, you can create a budget that works for you and find ways to stick to it over the long term. Remember to stay motivated, be flexible, and celebrate your successes along the way.


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