Blog post written by Scott Nelson, Financial Advisor with Legacy Financial Group.
Tax season is here, and along with the deadlines and deductions comes a golden opportunity to reevaluate your financial strategy. Rather than dreading the paperwork, think of it as a chance to take control of your money—one thoughtful step at a time.
Whether you’re hoping to grow your savings, pay off debt, or simply feel more in control of your money, creating a budget is the first step toward achieving your financial goals.
The good news? Budgeting doesn’t have to be complicated.
With a few simple steps, you can build a budget that fits your lifestyle and helps you make smarter financial decisions.
Why Budgeting Matters
A budget is more than just a spreadsheet or a list of numbers —it’s a roadmap for your financial future.
It helps you understand where your money is going, identify areas to trim back, and prioritize what matters most.
Think of it as a tool to help you live within your means while still working toward your dreams—whether that’s buying a home, taking a vacation, or saving for retirement.
Step 1: Know Your Income
Start by figuring out how much money you have coming in each month. This includes your salary, any side income, and other cash flow.
If your income varies, use an average from the past six months to get a realistic baseline.
Pro Tip: Don’t forget to account for taxes and deductions. Your take-home pay is what you’ll base your budget on, not your gross income.
Step 2: Track Your Expenses
Next, take a close look at where your money is going. Categorize your expenses into two buckets:
1. Fixed Expenses: These are the bills you pay every month, like rent or mortgage payments, utilities, car payments, and insurance.
2. Variable Expenses: These are the costs that can fluctuate, such as groceries, dining out, entertainment, and shopping.
Tracking your expenses for a month or two can be eye-opening.
You might be surprised by how much small expenses like coffee runs, subscriptions, or impulse purchases can chew up your budget.
Pro Tip: Use a budgeting app or a simple spreadsheet to make tracking easier. Many apps can sync with your bank accounts and automatically categorize your spending.
Step 3: Set Your Priorities
Once you know how much you’re earning and spending, it’s time to set priorities.
Start by covering your essential expenses, like housing, utilities, and groceries.
Then, allocate money toward your financial goals such as paying off debt, building an emergency fund, or saving for retirement.
Finally, don’t forget to leave room for fun—an overly restrictive budget is hard to stick with!
Pro Tip: A popular budgeting method is the 50/30/20 rule:
- 50% of your income goes toward needs (fixed expenses)
- 30% goes toward wants (variable expenses)
- 20% goes toward savings and debt repayment
Step 4: Adjust and Adapt
Your budget isn’t set in stone, it’s a living document that should evolve as your life changes.
If you’re overspending in one category, look for ways to cut back.
For example, could you cook at home more often instead of dining out?
Or cancel a subscription you no longer use?
On the flip side, if you get a raise or pay off a debt, consider reallocating that money toward your savings or another financial goal.
Pro Tip: Review your budget regularly —monthly is ideal—to ensure you’re staying on track.
Step 5: Build an Emergency Fund
One of the most important parts of any budget is an emergency fund.
Life is unpredictable, and a financial cushion can help you weather unexpected expenses, like a car repair or medical bill, without derailing your budget.
Aim to save three to six months’ worth of living expenses in an easily accessible savings account.
Even setting aside $500 can make a big difference in an emergency.
Budgeting Puts Control Back in Your Hands
Budgeting is a powerful tool that puts you in control of your finances and reduces stress.
By understanding your income, tracking your expenses, and setting clear priorities, you can create a budget that works for you, not against you.
Remember, the goal isn’t perfection. It’s progress. By making small, consistent changes, you’ll be better prepared to handle life’s financial curveballs—and discover the confidence that comes from knowing you’re in charge of your future.
Don’t hesitate to ask for help if you need it. At Legacy Financial Group, we’re here to support you on your financial journey.
If you’d like to learn more about budgeting or explore personalized financial strategies, connect with us.
Here’s to building a brighter financial future!