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Financially Fit: Building a Budget that Works


Financially Fit: Building a Budget that Works

Here’s a financial New Year’s resolution you can keep: Build a budget that works. It’s not impossible to “crack the code” on financial wellness– it's all about smart planning and discipline. Crafting a budget is the perfect way to take charge of your money. Don’t get overwhelmed with the countless budgeting strategies out there. Below are a few budgeting methods to get you started. Each method has its own advantages and flexibility, allowing you to align your financial habits with your goals for a financially fit year.

Pay Yourself First

Think of this budgeting method as a way to pay the future version of yourself first. The first “bill” you pay is to your own savings account. Afterward, you pay your other bills and expenses, then spend the remaining funds as you see fit. This tactic prioritizes savings by treating it as a fixed monthly expense that allows you to shift savings as a priority rather than an option. You prioritize saving to cover unexpected expenses and plan for the future.

The 50/30/20 Rule

This one's straightforward. Split your income three ways: 50% for needs, 30% for wants, and 20% for your financial obligations like savings or paying off debts. With this simple approach, your budget is portioned between three categories:

  • 50% of your net income (or your take-home pay) is allocated to your needs. This includes housing costs, utilities, insurance payments, groceries, etc.
  • 30% is dedicated to wants or discretionary spending, such as entertainment, dining out, or keeping up with the latest fashion trends.
  • 20% goes to your financial priorities, such as contributing to your savings and investment goals or paying down existing debt.

Customize the portions to fit what works best for your needs and goals. For example, it might be more aligned with your goals to assign 30% of your budget to your savings and 20% to your wants.

Monthly Cash Flow Budgeting

This method involves tracking every dollar earned and spent, and ensuring that all income is allocated to specific categories or expenses Income:

  • Calculate your total monthly income from all sources.
  • Expenses: List all your monthly expenses, including rent/mortgage, insurance, utilities, groceries, subscriptions, loan payments, and any other recurring costs.
  • Plan and Allocate: Allocate your monthly income to cover these expenses, ensuring that your income covers your necessary expenses first before considering discretionary spending or savings.

The level of planning and detail required for this method gives you a clear view of where your money is going. Use it as a chance to see where you might be overspending or missing out on opportunities to pay down debt, save, or invest.

Find yourself spending more than what’s coming in? Trim unnecessary expenses or make extra cash to offset costs. Start by cutting back on expenses like dining out, impulsive online shopping, subscriptions, luxury indulgences, and swapping over-priced entertainment with cost-effective or free options. Still need to make extra cash? Consider exploring side hustles or selling unwanted items online or at a yard sale.

These budgeting methods can be customized to fit your financial goals for the year. Creating and sticking to a budget is like having a clear road map for your year’s journey. It’s an important step in becoming financially fit in 2024. Family Trust offers free financial counseling to members. Stay tuned on how to book a one-on-one session with our new financial counselor, Rebecca Franco. If Family Trust can help you on your journey to being financially fit, use the chat feature on the bottom right corner of or in our app to get quick answers to your questions.

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