Creating a budget is a great way to help you manage your finances. You might think a budget is complicated or too time consuming to make, but we promise it's easy to do!. A budget is just a plan for how you spend your money. It shows you how much money you make and how much you spend. Here are the steps for creating your budget.

Determine your monthly income

Add up what you make each month from every source of income you have. That means your paycheck if you are working, any side hustle money you earn, unemployment benefits if you receive them, or scholarships and financial aid payments. Add up all the money you earn in a month and write that number down. This is your total monthly income.

List out all of your monthly bills and expenses

List out all the bills and expenses you have for the month. To estimate your monthly expenses, you’ll want to start by writing down everything you spend money on in a month (it’s helpful to create categories for your expenses). For expenses that vary month to month, like utilities, estimate what you spend on average each month. Here is a sample list of expense categories (or you can use our free budgeting guide to help you get started!):

1. Cell phone
2. Rent/room & board
3. Utilities (electricity, water, internet)
4. Transportation (car payment + gas, car insurance, bus pass, Uber/Lyft rides)
5. Groceries
6. Subscriptions (Netflix, Spotify premium)
7. Debt (Credit card payments, student loans, money you borrowed from a friend)
8. Savings (yes! Consider saving a part of your required expenses)
9. Personal care (clothes, hygiene products, medication, cleaning supplies)
10. Emergency savings account
11. Fun money (to go out to eat, hang out with friends, buy Starbucks, etc.)
12. Birthday present for best friend

Add up all of these and write down the total amount of your monthly expenses.

Balance your budget

Now it’s time to balance your budget. Start by using this simple equation: total income - total expenses = the difference. Take your monthly income (the number we added up in step #1) and subtract it by your monthly expenses (the number we calculated in step #2). What is your total?

If your final number is positive…

…that means you have money left over after paying all of your expenses (yay!) Here is an example:

Total monthly income: $1,500

Total monthly expenses: $1,300

$1,500 (total income) - $1,300 (total expenses) = $200 left over.

This means after you pay all of your bills, you still have $200 left in your account. You can leave this money in your account as your emergency fund, just in case you have a few unanticipated purchases or expenses, or you can adjust your budget by moving a portion of that $200 to another category, like groceries or savings. Budgets are meant to be flexible and they change every month. Make the adjustments you want.

If your number is negative…

…that means your expenses are more than you make per month and it’s time to see what expenses you can cut. Here’s an example:

Total monthly income: $1,400

Total monthly expenses: $1500

$1,400 (total income) - $1,500 (total expenses) = $-100.

Your expenses cost $100 more than your income so you need to determine which non-essential items can be cut from your budget or which items you can spend less on. If you have a Netflix or Spotify premium account, cancel them to free up money in your budget. Or perhaps you allocated $250 to your going out budget, but you know you can still have fun spending $150 a month. Move $100 from your going out budget to another expense to balance out your budget.

Stick to your budget and adjust accordingly

It may take a few tries to adjust to using a budget. Do not beat yourself up or feel down if you make a few mistakes along the way; what’s most important is that you try your best to get back on track. Also keep in mind that budgets are flexible and they change frequently. One month you may make less money, the next month you may make more money, or you might want to start saving up for a trip. Just adjust your budget accordingly! Prefer to use an app that helps you budget? Here are 4 free apps to help you create a budget.

For more money management tips, be sure to check out the rest of our FREE money management resources to learn how to be a smart spender and saver! And if you have any job or finance-related questions for us, just text#Jobs to 33-55-77 to chat with one of our advisors (if you're on a mobile device click here to have the text message set up for you).