A budget is the first step to financial wellness. How to get started


Taiwanese ethnicity man looking at the home budget and sorting out bills using his laptop in his cozy living room

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If you’re trying to get control of your finances, most financial advisors will start with one simple step: establishing a budget.

The coronavirus pandemic and ensuing economic recession and recovery has made a budget more important for many Americans. Some 80% of those surveyed in 2021 have a budget, according to Debt.com, a 12% jump from 2019.

Having a budget or spending plan is one of the first steps towards financial wellness because it acts as a guide for your money.

“I look at budgeting as being the principal thing in order to help you get from financial point A to financial point B,” said Frederick Standfield, a certified financial planner and founder of Lifewater Wealth Management in Atlanta. “It’s going to inform some critical decisions.”

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It’s important for everyone to have a budget, regardless of how much money they make, according to Tania Brown, a CFP and coach at SaverLife, a nonprofit focused on helping low-income Americans save.

“A budget tells your money where to go and what to do so that you can have the life you want,” she said. “The less money you have than the more critical it is you prioritize where that money goes.”

How to make a budget

The first step in creating a solid budget is to define your financial goals, experts say. Financial advisors recommend different ways of doing this, such as thinking about your big picture goals or identifying your core values.

Once you have a clear picture of what you’re trying to accomplish, you’ll need to take a financial inventory of where you are, including income, expenses and any debt. Then, you’ll take your monthly salary and allocate parts of it to your essential expenses first, then your financial goals. If you still have money left over, you can apply it to spending in more fun categories, such as travel or eating out.

If you don’t have enough income to cover all your wants, needs and save for long-term goals, you may have to cut back on spending or consider a longer time frame to save. These choices help shape your financial plan.

“Making a conscious decision on how much to spend, how much to save and what to reduce or let go provides tremendous direction,” said Jerel Butler, a CFP and founder of Millennial Financial Solutions in New Orleans.

Once you’ve determined a budget, the next part is automating parts that you can, such as paying bills and saving, and tracking your spending.

There are many ways to do this, from using a simple spreadsheet to using an app such as Mint, Personal Capital or You Need a Budget (YNAB.) What’s important is finding the money-tracking method that works best for you so that you’ll continue to use it.

Set yourself up for success

To be sure, some people will struggle to stick to their budget, especially at first. There are a few things that can help you get back on track.

The first may be changing your mindset about budgeting in general, according to Julie Quick, a CFP and founder of Cultivate Financial Wellness in White Lake, Michigan. Instead of using the word “budget,” which she says people associate with the financial version of being on a diet, she helps clients develop a spending plan.

The idea is the same — it’s a plan for how you’ll allocate and spend money — but the difference in vocabulary helps people feel like they’re in control instead of restricting themselves.

“I tell all my clients, ‘I am not going to tell what you can and can’t spend money on, only you can do that,'” she said. “But it’s about understanding what’s important to you and aligning your dollars accordingly.”

You can also try a new method of budgeting or tracking your spending, said Brown. If using an app that tracks your spending all the time is too stressful, you can try something like doing a monthly check-in with your own spreadsheets, for example.

Experts also say that a solid budget generally takes a few months to perfect, because people usually forget some expenses at first or overestimate how much they’ll save.

To combat this, Brown suggests giving yourself a lot of grace at the beginning and set yourself up for success by choosing reachable goals at least for the first few months.

For example, if someone’s goal is to save $100 a month, she’ll recommend that they start with $50. When you meet or exceed a goal, it gives you the encouragement to keep going, she said.  

When to consult a professional

Many people can set and maintain a budget on their own, but if you’re really struggling after a few months, it may be time to consult with a professional.

Those who need help with the basics of budgeting or have a spending problem may want to work with a financial counselor, coach or even a financial therapist. If you’re looking to invest long-term or need help with goals such as buying a house, retiring or saving for college should look to work with a financial advisor.

Couples especially may want to work with an expert to have the help of an objective third party in working towards their goals, said Kevin Lao, a CFP and founder of Imagine Financial Security in St. Augustine, Florida.

“They might have different philosophies, or one might be a stronger personality than the other,” he said. “I see a lot of value in that process of sitting down and talking to married couples about their goals.”

A professional will also help with one of the most important parts of budgeting – just getting started.

“If you don’t take the first step and start, you can never get there,” said Standfield. “So just get started.”

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