How To Build A Budget In 2024

Building a budget is an important lifelong skill. But it’s also something that changes a little bit each year as financial tips shift, as new technologies emerge, and as the market changes in response to economic factors. Let’s break down how to build a budget in 2022 so you can save up and buy anything you need in the short and long-term future.

Table of Contents

Determine Your Full Income

Firstly, you need to figure out your full income. Once you know how much money you make each month, you can budget accordingly based on:

How much money you can count on receiving regularly
How much money you have to funnel away for necessary expenses
How much money you’ll have left over

Include your primary sources of income, like your job or the job of your spouse, and any other reliable sources of income you can count on no matter what.

Don’t forget to calculate alternative sources of income that might contribute to your monthly budget, too, even if they aren’t as reliable or regular. For example, if you get free money on Cash App, or if you get free money from your investments or from your affiliate marketing business, remember to account for this when determining your full income.

Free money sources can fluctuate over time. If you aren’t sure how much free money you’ll have next month, try to average out how much free money you’ve earned over the last six months when counting this income stream.

Calculate All Expenses

The next step to creating a budget for 2022 is to calculate your expenses. These should be separated into two major types:

Necessary or fixed expenses
Unnecessary or variable expenses

Fixed expenses are the things you absolutely must pay for, like your house’s mortgage, your monthly grocery bill, and so on. Unnecessary or variable expenses are things like eating out, buying a new video game console, etc.

Take a long, hard look at your expenses over the last few months and average out both your fixed and variable expenses. Once you have this number, you’ll know how much money you normally spend, how that compares to your total income, and if you need to make any adjustments.

Set Short and Long-Term Financial Goals

Now it’s time to look to the future. Do yourself and your wallet a favor and set both short and long-term financial goals.

For instance, do you want to remodel your home? Set a financial goal to save up $2000. Do you need to save for your child’s college fund? Plan to funnel at least a few hundred dollars into a savings account each month for many years so it’s ready by the time they are college-bound!

Setting your financial goals now will help you meet them, especially if you have to count your dollars carefully.

Follow the 50/30/20 Rule

Alternatively, you can take some mental pressure off yourself and simply follow the 50/30/20 budget scheme. In a nutshell, this has you devote:

50% of your income to necessities
30% of your income to your “wants,” such as dining out, traveling, or streaming subscriptions
20% of your income to debts or savings for emergencies

This easy-to-remember rule is great if you want to build a budget with a minimum of hassle and simply get to saving and spending ASAP.

Use the 50/30/20 rule if you want a foolproof way to save consistently without having to think too much about it. If you have more than 20% of your income for savings, you can enjoy the extra fun money or simply save a little more each month.

Use a Budget-Building Tool

Modern banks and financial platforms include budget-building tools. These are highly useful and can help you break down, in exacting detail:

What you spend your money on
What you could afford to cut back on
How best to accomplish your financial goals

Budget-building tools are fantastic if you aren’t the most financially literate or if you have difficulty sticking to a budgeting plan. You should use budget-building tools in conjunction with the next major tip…

Use Auto-Pay Settings

The majority of digital banks include auto-pay settings. Auto-pay settings allow you to automatically funnel a proportion of each paycheck received into a savings account. Use auto-pay settings so you save money consistently without having to make the decision to do so each time.

Alternatively, you can use auto-pay settings for paying off bills, credit card debt, and other necessary expenses. Again, this is a great way to handle these financial obligations without running the risk of forgetting and incurring extra fees or credit score hits as a result.

In the end, building a budget is contingent on planning, understanding your finances, and planning for future expenses. Once you do all that, you’ll be able to budget for practically any economic challenge ahead. Good luck!

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