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How Do I Create a Budget?

The first step toward success is knowing you need a budget to maintain control of your cash flow and stay on track to reach your goals.

Whether you enjoy using spreadsheets, apps or even pencil and paper – choose a system that works for you, and stick to it!

4-Step Budgeting Process: Understand your current situation, Know where your money should go, Create a plan, Monitor and make adjustments

  • Know what money is coming in. This includes not only income from your paycheck, but any gifts, tax refunds, rebates, proceeds from selling stuff. It all counts!
  • Know where your money is going out. It’s the same thing here. Don’t only count fixed monthly expenses such as rent or mortgage and car payments. Be sure to account for expenses that may come less frequently such as insurance premiums and other anticipated expenses such as home maintenance and oil changes. Be aware of seasonal spending like holidays, back-to-school, birthdays, and summer vacation.

  • Saving and investing should generally be 10% – 15% of pretax income.
  • Transportation expenses, including auto payment, insurance, fuel, and maintenance, should be less than 15% – 20% of pretax income, and the lower the better.
  • Housing payments generally should be less than 25% of your pretax income or limited to your Basic Allowance for Housing (BAH).

  • Evaluate your current spending habits and plan.
  • Focus on funding your goals and set limits on monthly spending.
  • Pay your bills on time, everytime. If you are struggling to pay larger expenses at the beginning of the month, consider asking your lender to change the payment due date to help smooth out your monthly cash flow.
  • When it comes to cutting back, no expense category should be off the table.
  • Be sure to keep some “fun” expenses so your plan isn’t so rigid that it’s too hard to stick to.

Budgeting is not a one-and-done exercise. It’s important to monitor your cash flow. It could be each pay period, monthly or whatever cadence works for your family.

Also be sure to review your budget around financially significant life events like:

  • A pay increase or decrease
  • Deployment orders
  • A PCS move
  • Major purchase
  • Unexpected large bill
  • Unexpected influx of cash
  • Change in family situation