Lesson 1 of 3 · 2 minute read
Make a plan for your paycheck
A budget is a simple plan for your money. Here's how to make your first one.
A BudgetA plan for where your money will go, so you know what you can spend before you spend it.More in the glossary isn’t a diet for your wallet. It’s a plan. It tells your money where to go, so you don’t have to wonder where it went.
Step 1: Start with what you really get paid
Use your Take-home payThe money that actually reaches you after taxes and other deductions come out of your paycheck. Also called net pay.More in the glossary. That’s the money that lands in your account after taxes and other deductions. Don’t use your hourly rate or your salary. That’s your Gross payWhat you earn before taxes and other deductions come out. Your take-home pay is less.More in the glossary, and it’s more than you actually get.
If your pay changes from week to week, plan with a lower amount than usual. The lesson When your pay changes week to week shows how.
Step 2: List your bills
Write down the bills that come every month. They’re often the same each time:
- Rent
- Utilities, like electric, gas, and water
- Phone and internet
- A car payment or a bus pass
- The minimum payments on any debts
Step 3: List your everyday spending
Next, list the costs that change from month to month, like groceries, gas, and household supplies. Not sure how much you spend? Look at last month’s bank statement or receipts. When in doubt, guess a little high.
Step 4: Subtract
Take your pay. Subtract your bills and everyday spending. What’s left?
- Money left over? Give it a job before it slips away. Saving even part of it helps.
- Coming up short? You’re not alone. Look at the things you could pause or cut back. Then call your bill companies and ask about lower-cost plans or payment plans.
Step 5: Check in
A budget isn’t set in stone. After a month, look at it again. Change the numbers to match what really happened.
Tip: Plan one paycheck at a time. Match each bill to the paycheck that comes before its due date.
A BudgetA plan for where your money will go, so you know what you can spend before you spend it.More in the glossary is a plan for your money. It tells your money where to go.
Start with your Take-home payThe money that actually reaches you after taxes and other deductions come out of your paycheck. Also called net pay.More in the glossary. That is the money that really reaches you after taxes.
Write down the bills that come each month. Then add everyday costs, like food and gas.
Take your pay and subtract your costs. If money is left, give it a job, like saving.
Coming up short? You are not alone. Cut back where you can, and ask bill companies about payment plans.