A Guide to Budgeting

Man using calculator and calculate bills in home office.Written by Optimity Team

2 min read

For over 4 years, Optimity has been learning from our community. From physical activity, to mental wellness and financial literacy, we’ve learned about the challenges you’ve overcome, the milestones you’ve achieved, and the questions you still have. 

One challenge that almost half of our community is facing is that they don’t keep a monthly budget, and the number one reason was not knowing where to start. The benefits of budgeting can include increased financial stability and awareness along with less stress and better mental health (just to name a few!). With that in mind, we’ve created a simple three-step guide to creating a budget so you have the information you need to start your own.

1 – Set your goals

Whether your goal is paying down debt, creating an emergency fund, or having enough money to go out to eat once a week, it’s important to have goals in mind before you create your budget. Your goal can be a stand-alone or one of many, short-term or long-term. It does not have to be something as daunting as saving for a house or a car. It can be as simple as saving for a date night out every month or for a special trip. The important thing is that your goals are specific, measurable, achievable, realistic and timely. Yup, you know where we’re going: SMART goals. Keep your goals in mind, and adapt them as needed, as you continue to create your budget. 

2 – Track and categorize your expenses

A key to making an accurate budget is understanding how much money you’re earning, and how you are currently spending that money. There are several apps that can help you with this process. But, if you prefer a more hands-on approach, track your monthly spending – yes, everything – and use that as your sample. 

Once you’ve chosen how you’re going to track your spending, you can start to categorize your expenditures. Break them down into Fixed (rent, food) and Variable, or get even more specific with categories like Utilities, Grocery, Travel, etc.  Next, subtract all your monthly expenses from your income. This way, you will see how much is left over for your future goals, and the areas you may need to cut back on.

3 – Match your goals, income, and expenditure

Once you’ve got all the information you need, the final step of creating a budget is to actually create one. This is when being realistic is key. If you go out to 15 restaurants a month, but want to bring that number down, budgeting enough for only two dinners out every month is unrealistic. Dropping that number down to 10 might be a better starting point. Creating a budget doesn’t mean that you can’t spend money or that you must feel bad about spending money on non-essential purchases. There is nothing wrong with treating yourself. The goal of creating a budget is taking your goals, income, and spending, and finding a point where they can all connect. Tracking your spending will enable you to achieve your goals and feel more confident in your financial situation.

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