Most people have a general idea of how to spend each paycheck.

They know they need to cover their obligatory expenses – things like their rent/mortgage, insurance, etc. – and that they shouldn’t blow the rest.

This is no way to handle your money. Creating a budget will help you make the most of each paycheck and bring you a lot closer to reaching your financial goals.

4 Steps for Creating a Budget

As you’re about to see, creating a budget is easy. Just follow these four simple steps and your finances will be in much better hands.

1. Get Clear About How Much You Make

For some of you, this is easy. Each paycheck is the same.

However, if you work in a field where you earn tips, commissions, or your paycheck otherwise varies, you’ll want to come up with a reliable amount you use as your monthly total. Usually, this means taking the average of what you make over six months.

For your income, we’re only interested in what you make after taxes and contributions.

2. Understand Where You’re Spending Money

This is where things tend to get interesting. Brace yourself for some surprises.

Go online and pull your bank statements and credit card accounts. The latter will often give you a breakdown of what you spend by category.

We want the same breakdown across every method of spending. Don’t get too complicated, though. Just break it down into two broad categories:

  • Need to Spend:
    • Rent/Mortgage
    • Utilities
    • Phone Bill
    • Groceries
    • Insurance


  • Want to Spend:
    • Dining Out
    • Recreational Activities
    • Vacations
    • Clothes You Don’t Need for Work

Essentially, one category is for the things you need to spend money on and the other is for luxury items you like spending money on but don’t have to.

3. Come Up with Financial Goals

Though the information gleaned from the last step was probably enlightening, it’s not very helpful if you don’t have a goal for your money.

Typical financial goals include saving for retirement or paying down debt. Like any good goal, get specific about yours. How much will it cost you to achieve your financial goal and when do you want to do it by? This will help inform the next step.

4. Cut Your Spending

Finally, look for ways to cut money from your “Want to Spend” category. At first, focus on just one thing. Maybe it’s the takeout you order from work or the expensive coffee drinks you grab in the morning.

Whatever the case, make sure you put the savings toward your bigger goals. Check back at least once a month, too, and look for more ways you can revise your budget.

Mooney Lyons Can Help You with Your Financial Plans

If you’d like a serious boost to improving how you spend your money, Mooney Lyons can help. Contact us today. After you tell us about your financial goals, we’ll give you expert budgeting advice that will make them easier to achieve.