Creating a budget made easy
Budgeting might sound like a chore, but it's the key to taking control of your money. By creating a simple plan, you can keep track of what’s coming in, what’s going out, reduce debt, and enjoy life at the same time. Enjoy? Yes, you read that right. Because in this blog, we will show you that creating a budget is fun and easy. Let’s dive in!
1. Get an overview of your finances (and your money mindset)
Before you can create a budget, you need to understand your finances. Start by asking yourself three basic questions:
- What’s my monthly income (after taxes)?
- How much do I spend, and what am I spending it on?
- Does my spending match up with how much I earn each month?
Write it all down, or better yet, use tools like the analytics in the neon app to track your expenses. The more detailed you are, the better prepared you’ll be to budget.
Then, think about how you feel about money: Are you someone who loves to spend, or do you save every penny? This mindset affects how well you’ll stick to your budget. Knowing your habits will help you stay realistic.
2. Create your budget
Now that you know where your money goes, it’s time to create your budget. One of the easiest ways is the 50/30/20 rule from the book All Your Worth by Elizabeth Warren and Amelia Warren Tyagi. This method divides your income into three categories:
- 50% Needs: Things like rent, utilities, insurance, and groceries. Essentials you can’t live without.
- 30% Wants: Fun stuff like eating out, hobbies, vacations, and shopping. Yes, budgeting can include fun!
- 20% Savings: For building an emergency fund, paying off debt, or saving for retirement (such as pillar 3a) or a house.
This rule helps balance your spending and saving so you can cover the basics, enjoy life, and still plan for the future. But don’t worry, it’s flexible! Adjust it based on your lifestyle and what matters most to you.
Pro Tip: Check out our budget calculator in this blog! Enter your income and expenses, and see how close you are to following the 50/30/20 rule.
Feeling off-track? Try tweaking a few things! Maybe there's some room in your «needs» category – could you find a cheaper insurance plan or cut unnecessary expenses? The «wants» category is also a great place to make adjustments if you need more room for savings.
Bonus: If you're a detail-oriented person who loves spreadsheets, we’ve got a super-detailed budget template from Rouven Fries that lets you geek out with the numbers! The spreadsheet is explained in his blog post.
Once you have your budget in place, check in regularly to see if you’re sticking to it. If something isn’t working, adjust without guilt – budgeting is about finding what works best for you!
3. Reduce debt and build an emergency fund
Got debt? You're not alone, but paying it off should be a priority. Credit card debt and loans often come with high interest, which can be a drain on your finances over time. Make it your priority to reduce this burden as soon as possible.
At the same time, start building an emergency fund (yes, you need one!). Aim to save enough to cover three to six months of living expenses. This way, if something unexpected happens – like job loss or a car repair – you won’t be scrambling for cash.
4. Set clear savings goals
Saving is way more fun when you’ve got a specific goal in mind. What are you saving for? Maybe it’s a dream vacation, a new car, or your first home. Or maybe it’s for the big stuff, like retirement or long-term wealth. Whatever your goals, knowing what you’re working towards will keep you motivated to stick to your budget.
5. Start investing
Saving is great, but investing is where your money really starts to grow. Once your debts are paid and you’ve built up an emergency fund, consider putting your money to work. Whether you’re into stocks or ETFs, there are plenty of options to grow your wealth. Start small and see what works for you. Investing isn’t as intimidating as it may seem, and it’s a key step toward securing your financial future. And of course, we are always here to help you get started: Check out our «Invest» section on our blog, where you will find lots of useful resources and how-to-videos on investing.