How to Make a Budget, According to a Money Expert

Surely everyone wishes they could be more organized with their finances, even if they are fairly responsible about them. Whether you’re hoping to pay off some student loan debt or simply want to be savvier about saving money, learning how to make a budget is a worthwhile way to start. But if you’ve never done it before, the thought alone may be overwhelming and intimidating.

“Budgeting is an ongoing process, which you should review and adjust regularly,” says money expert Jannese Torres. Budgeting doesn’t have to be super complicated, though. Below, Torres outlines key steps to make basic financial planning a bit more seamless.

Experts Featured in This Article

Jannese Torres is the host of the “Yo Quiero Dinero” podcast and author of “Financially Lit!: The Modern Latina’s Guide to Level Up Your Dinero & Become Financially Poderosa.”

How to Make a Budget

Step 1: Look At the Big Picture

The first step you should take before outlining your budget is to get a clear picture of your financial situation by tracking your income and expenses for at least one month. You can do this by using a spreadsheet or budgeting app, like Monarch or Empower, or a physical budgeting planner, Torres says.

“Divide your expenses into categories such as housing, transportation, groceries, dining out, entertainment, utilities, and savings,” Torres says. “This helps you understand where your money goes and identify areas where you can cut back.”

Once you have a clear picture of how much is coming in and going out each month, she recommends taking note of the following factors when you sit down to create your budget.

Step 2: Consider Your Lifestyle

According to Torres, there are a few external factors to keep in mind when creating a budget. You should consider your age and the stage of life you’re in, such as whether you’re single or have a family, or if you’re a recent college graduate at your first job.

For example, “A single woman in her late 30s, may want to consider more substantial savings for retirement, potential home ownership, investing, planning for long-term goals like starting a business, and ensuring she has adequate insurance coverage,” Torres says. “Recent graduates [meanwhile] will probably want to focus on managing student loans, building an emergency fund, and starting to save for retirement.”

If you have a family, Torres recommends including them when creating your budget, so they can understand why you may have to prioritize certain things before others and occasionally say no to something that is more of a want than a need.

Generally speaking, younger individuals (i.e. those under 30 and without children) should:

Meanwhile, older individuals (i.e. those over 30 who are married or partnered and either have kids or are planning to) should:

Step 3: Determine Your Goals

According to Torres, when planning your budget, you should identify short-term and long-term financial goals. Are you hoping to take an international trip this summer? Aiming to pay off your student loan debt by a certain period of time? Based on that, “Allocate a portion of your income to different categories based on past spending and future goals,” she says.

In terms of how much to put away, Torres recommends aiming to save at least 20 percent of your income, which can be adjusted based on individual circumstances and goals. Another approach is the 50/30/20 rule: 50 percent of your income for needs, 30 percent for wants, and 20 percent for savings and debt repayment.

You should also regularly review your budget and make adjustments as needed. If you’re having a hard time hitting your savings goals each month, perhaps you can consider cutting a meal or two out each week and opting to stay in and cook more often.

“Be flexible and willing to make changes to stay on track, and set up automatic transfers to your savings account to ensure consistency,” Torres says.

Step 4: Find Creative Ways to Save

Beyond the more routine steps of creating a budget, there are various other ways you can save money and cut back on your spending, Torres says. These include:

Budgeting Pitfalls to Avoid

Torres also cautions against overlooking commonly forgotten expenses. These include:

Emilia Benton is a freelance health and wellness journalist who is particularly passionate about sharing diverse stories and elevating underrepresented voices. In addition to PS, her work has been published by Runner’s World, Women’s Health, Self, Outside, and the Houston Chronicle, among others. Emilia is also a 13-time marathoner and a USATF Level 1-certified run coach.