7 Steps to Create a Simple Budget

Your budget is a blueprint of what you spend.

 You work hard for your money. While much of that income goes toward meeting your obligations (think: housing, food, cars, insurance), it’s nice to have a little extra for the finer things in life.

A household budget is like a written blueprint for spending that helps document how much you take in, how much you pay out, and how you might stretch your dollars a little further. 

Let's walk through an overview of how to start creating a budget in 7 steps, and why it should pay off.

Step 1: Add up your income. 

You likely know your annual salary, but to compute your household budget, you’ll need to know how much you earn monthly. Reference paystubs for all the wage-earners in your family to get a sense of your total monthly household income. Be sure to also account for regular income from other sources, such as interest or dividends. Subtract the amount deducted for taxes, Social Security, Medicare, and your retirement plan. Your take-home pay after all expenses have been deducted is known as your net income.

Step 2: Compute your expenses.

How much do you spend each month? Expenses can be divided into two categories: fixed and variable. You pay the same amount every month for fixed expenses, like housing, car loan payments, and cable. Variable expenses change month to month, and can include grocery purchases, electric bills, clothing, and entertainment costs. 

Our tip: You can find expense information by logging into your BancFirst online banking account to review your checking account payment history and eStatements. Individual expenditures are also listed on credit card statements, which you can view on paper or online.

Step 3: Calculate the difference.

The next step is to use basic math to determine the difference between your income and your expenses. If your net income exceeds your expenses, you’re in a great position and can work to make that gap even larger. If your expenses exceed your income, you know you need to look for ways to save.

Step 4: Set financial goals.

You’re most likely to follow a budget if you have specific financial goals in mind. These can be short-term goals, such as paying down debt or buying new appliances, or long-term goals, like saving to buy a house, fund a child’s college education, or build a retirement savings nest egg. 

Step 5: Crunch the numbers.

Now it’s time to really get organized. Divide your expenses into categories, which might include:

• Housing
• Transportation
• Loan payments 
• Utilities 
• Food 
• Health care
• Entertainment

Within those categories, identify each month’s fixed expenses and variable expenses. You probably won’t be able to alter your fixed expenses very much (i.e. rent or mortgage), but taking a hard look at your variable expenses can shine a light on areas where you might cut back (e.g. monthly subscriptions). 

Determine what you need and what you want, then cut back where possible. Get creative finding ways to save money, such as:

• Dining out less often (time to try your hand at sourdough!)
• Reducing your electric use 
• Carpooling or taking public transportation 

Step 6: Break down your budget.

A good rule of thumb is to put 50% of your budget toward fixed expenses, 30% toward variable or flexible spending items, and 20% toward your goals. Whatever formula you use, make sure to build in a smart savings plan, especially if you’re setting money aside for long-term goals. 

Step 7: Be diligent. 

Once you identify ways to save, set monthly goals for each category. You’ll need to keep an eye on your spending over time for your efforts to pay off. Whether you choose to save a receipt, send yourself a text, or make a note in your budgeting app, get in the habit of documenting every expenditure. The very act of monitoring your spending may make you think twice about buying things you don’t really need. 

Check in with your budgeting software to track your progress at regular intervals. Over time, you’ll sharpen your skills and come up with new and better ways to make the most of your money.

Build toward your financial goals with BancFirst resources, including our budget calculators and online money management tool. And when you're ready to start setting money aside, BancFirst offers interest-bearing savings accounts to help you make the most of your money.