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How to Make a Budget as an Adult

Do you have a budget? If not, it might be time to set one up. Although creating a budget might seem scary (it involves both math and looking at your bank account), without one, you're basically running on a financial treadmill going nowhere.


How to make a budget

A budget is essentially just a plan for your money based on your priorities. By creating and sticking to your budget, you’re giving yourself the best chance of meeting your financial goals, whether that's going on a vacation, paying off your debt, or retiring in 20 years.

Here's a quick step-by-step guide on how to make a budget:

1. Write down your monthly income.

  • Income fluctuates? Use income from your lowest-earning month as your baseline.

  • Irregular/passive income (i.e., royalties, bonuses, rental income, etc.)? Average out to get a monthly estimate.

  • Starting a new job? An after-tax paycheck calculator is your friend.

2. Write down all the necessary expenses, i.e., mortgage/rent, insurance, utilities, transportation, groceries, debt repayments, phone, personal care (toiletries, prescription medications, haircuts, etc.).

  • You really shouldn't be spending more than 30% of your gross monthly income on housing. Basically, if you make $3,000 a month, your rent should not be higher than $900.

3. Write down your discretionary spending, i.e., vacations, Netflix, gifts, etc. This probably varies from month to month, so add everything up from the past year and divide by 12. 4. Add up all your expenses and compare the number to your total income.

  • Earn more than you spend? Amazing.

  • Spend more than you earn? (Try to) cut down. Eat less take out, cancel a subscription, buy non-perishable items in bulk, shop around for insurance, etc.

5. Decide on your savings priorities.

  • Ideally, every month, you should be putting aside money for 1) an emergency fund (3-6 months of expenses for unexpected events, like an illness or your car breaking down), 2) a retirement fund (i.e., IRA, 401K, etc.), 3) personal goals (a vacation, a house deposit, etc.)

6. Monitor your budget.

  • Continue tracking your expenses to avoid overspending. Circumstances change, so evaluate and adjust your budget monthly to be on track to reach your goals.

Types of budgets

When it comes to budget systems, one size does not fit all. Here are some budget systems to consider:


The zero-based budget: Use every dollar of your monthly income deliberately (for example, pay for your groceries and utilities, save a certain amount for vacation, and put money aside for retirement) until you have zero dollars left.


Pay-yourself-first: Set aside a specific portion of your monthly income for savings goals like emergency fund and retirement, then spend the rest of your money as you see fit.


50/30/20: Allocate 50% of your income to necessities, 30% to wants, and 20% to savings and debt repayment. Note that the 50/30/20 proportion is not set in stone. If you have a lot of debt or other expenses, you can customize the system to suit your needs (for example, 40/20/30).


Can't see a budget method you like? Check out this blog post on Indeed.com for more option.

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