Most people know that building a budget is one of the most important things you can do for your financial health, but the thought of coming up with one can be daunting. If you’re intimidated by the idea of line items, spreadsheets, and categorizing your expenses, there’s good news – it’s not as difficult as you might think! Here are a few simple steps for creating your own budget.

Figure out your income

The first step to building a budget is figuring out how much money you have coming in. Remember, your income includes your paycheck and any money you might make from side hustles or investments. Tally it all up, figure out how much money you make each month, and that’s the starting point for your budget.

Figure out how much essentials cost

Next, figure out your fixed expenses. These are costs that stay the same every month, like rent or mortgage payments, car payments, and insurance premiums. Then, look at expenses for essentials that can vary, like utility or grocery bills. Once you know how much you spend on these essential items, you can start planning for your other expenses.

Look for ways to save

Once you understand your income and fixed expenses, you can start to find ways to trim expenses and free up more money for savings and debt repayment. For example, you might cut back on dining out or streaming services, or you might sell some unused items around the house. You can also negotiate debts. For example, you can refinance student loans for a lower interest rate and/or lower your monthly payment. Some loan servicers even have additional perks for banking with them, such as linked checking that potentially lowers your interest rate.

Come up with a spending plan

Once you understand where your money is going and how much you have, it’s time to build the actual budget. Based on the numbers you came up with in the previous steps, estimate how much you’ll need for essentials like housing, food, and transportation; how much you’ll need for discretionary items like entertainment expenses; and how much you can save or invest. If you’re just getting started, it’s often easiest to come up with a simple budget that puts purchases and expenses into broad categories.

Stick to it

There are a few different ways to approach budgeting, but the most important thing is to find a method that works for you. Building a budget is an important step in taking control of your finances. By understanding your income and expenses, you can find ways to save money and make your money work for you. So, take the time to sit down and figure out where your money is going – it’s worth it in the long run.