It is a common occurrence that individuals and households have financial hopes and goals that they keep in their mind. Unfortunately, many of these goals do not seem any closer at the end of each month, and those same individuals get discouraged as they feel their goals may not be achievable. We hope to emphasize a key tool that can allow individuals to actually take control of their spending – and that tool is a budget.

Often times when people hear the word “budget” they think of something that is restrictive or burdensome. Some people feel like it may take too much time to create a budget, they don’t like tracking their spending, or in some cases they may feel discouraged by the process. In reality, a budget lets people create a list of their financial priorities and decide how much money to spend on each one – and then work to not spend more than those amounts. For example, most people place a high priority on things like housing, food, healthcare, utilities, etc. These are basic needs that most people make a high priority in their budget so they can ensure they have them. However, because these basic needs are such a high priority, we may not do a good job in determining how much should be spent for these items, and then also making sure there is enough left over for our other financial goals such as eliminating debt and saving for the future. It should be understood that the more money that is spent for any one item in our budget, the less that is available for other financial priorities. So, it is important for each person to determine how much they will spend in each area. Here are a few guidelines that may help:

The first suggestion is to determine how much is going to be saved for emergencies and for wealth building. In general, individuals should try and have 3 to 6 months’ worth of expenses saved in their emergency fund. Additionally, individuals will probably target having 10-12 times their annual income saved up for future retirement1. Sometimes these numbers seem overwhelming for individuals, so it is important to remember the way these savings goals will be achieved is by setting aside some money each month that will build up over time. Retirement savings should be about 12-15% of your income each month, and savings for an emergency fund will vary, but you want to make sure that each month you are making progress towards the goal. One strategy that has helped many people is to determine how much will be going into savings and retirement – and then put that money away FIRST. Everything that is left over will be applied to all living expenses. This strategy is called “paying yourself first”.

The second suggestion is to set a boundary for housing expense that is around 25-30% of income. Housing is the single biggest monthly expense for most people and there are many people throughout the United States that spend 40% and even 50% of their income for this one expense2. Obviously, the higher the percentage spent on this single area, the more difficult it may be to have money for other priorities – and to save. This can sometimes be a challenge based on the cost of living but will be an important consideration for a budget.

The final suggestion is to understand it may take a couple months before you find success with your budget. It may take some trial and error to determine what is an appropriate amount for food, entertainment, clothes, and other expenses – especially if this is your first time making a budget! Rather than getting discouraged if your estimates spend are wrong, make the changes that are needed and try again. It is worth it to get it right. Many people have said that after creating a budget that works and taking control of how their money is being spent, they actually felt like their income increased because they have been able to start reaching the goals they set for themselves and avoiding overspending.

1 Fidelity, “How much do I need to retire?”,

2 Leonhardt, Megan, “This map shows which U.S. states spend the most (and least) on household expenses”, CNBC, NBCUniversal News Group, 16 April 2021,