6.3: Start with the Basics - Budgeting

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Thinking about managing your credit, avoiding or paying down debt and building a solid financial foundation all can feel overwhelming. However, this process doesn’t have to be. The simplest place to start is with the basics – creating and following a good budget.

There are five simple steps that you can follow to put together a budget that will work for you.

Define your goals (refer back to the Goal-setting Chapter and SMART goals) – The first step is to set your financial goals. Most goals you set will have some type of financial impact. Break your goals into the three categories below and allow them to guide the decisions you make about spending and saving.
Short-term goals, which are goals you plan to reach in under a year, like buying new furniture.
Mid-term goals, which are goals you plan to reach in one-to-five years, like saving for a vacation.
Long-term goals, which are goals you plan to reach in more than five years, like buying a house.
Be honest with yourself - The second step is to be honest with yourself about your income and expenses. Take the time to determine your true income after taxes and deductions so that you’re planning to spend only the money you actually have available. Then list out all your financial responsibilities, including everything from rent to gym memberships. Finally, subtract your expenses from your income. Do you have enough?
Reduce your spending – If you end up with a negative number in the step above, you have some work to do, which will start with balancing your budget by cutting expenses. If your income is higher than your expenses, there still may be areas where you can cut back or ways you can save even more. These cuts can range from skipping a cup of coffee out to changing your internet service provider or refinancing a loan.
Save and plan ahead - Having savings lets you rely less on credit and avoid creating additional debt when an unexpected expense crops up. You should treat savings like a bill you pay each month and plan for possible surprises in the short-term, as well as known savings goals, like retirement, in the long-term.
Review and adjust - Once you’ve balanced your budget, it’s important to not just set it and forget it. You should give yourself a trial period to make sure your budget is working and schedule regular times to check back and adjust as needed. Reviewing and adjusting is important as your goals or circumstances may change over time. Even something seemingly small, like getting a pet, can cause significant changes to your finances.

If you’re ready to jump into budgeting, but aren’t sure where to start, look for a budgeting template that fits your needs and consider the questions in the image below as you go through each step.

List of Budgeting Steps

No matter your age, good money management is important. And while some things remain constant at every stage of your life, like the importance of paying bills on time, other things may fluctuate. The good news is that no matter where you are in life, there are free resources available to help you gain the knowledge you need to become confident in building and maintaining a strong financial foundation.

Visit the PSECU website (psecu.com) for access to:

Our Online Learning Center, which has more than 30 short personal finance lessons that cover topics from protecting yourself from identity theft and building healthy habits to buying a car or home and take just three to five minutes to complete. There’s even a brief survey you can take to generate a personalized playlist designed to meet your needs. Available in both English and Spanish.
Our blog, which contains financial tips for every stage in life.
Our on-demand webinars, which are available whenever, wherever works best for you.

PRO TIP:

A lot of financial aid, especially scholarships, have limited funds and are first come, first served so it's important to meet all the deadlines. The Free Application for Federal Student Aid (FASFA) is the first step in applying for financial aid and is available to complete every year on October 1^st. Making sure to complete it as soon as possible every year will help maximize your financial aid award.

- Andrew Marah, Director, Financial Aid

The content provided in this publication is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Some products not offered by PSECU. PSECU does not endorse any third parties, including, but not limited to, referenced individuals, companies, organizations, blogs, or websites. PSECU does not warrant any advice provided by third parties. PSECU does not guarantee the accuracy or completeness of the information provided by third parties. PSECU recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.