6 Steps to Create Your Spending Plan

By Jennifer Tucker
July 10th, 2023 | 3 Min. Read

Creating a spending plan is important for a lot of reasons. A budget can help you track your spending, grow your savings, pay down debt, and even build your credit. It can give you better control of your finances, empowering you to make smart decisions and work toward financial freedom.

So, what are the steps in budget planning? If you’re wondering how to create a budget and where to start, here are six simple steps to get you moving in the right direction.

Gather your financial information

Before beginning your budget, you’ll need to gather all the relevant financial documents. This may include:

  • Your bank account statements
  • Paystubs and W-2s or 1099 forms
  • Mortgage or rental statements
  • Utility bills
  • Credit card statements
  • Loan statements
  • Insurance statements

The goal is to collect as much information as you can about your income and expenses. Try to gather at least 12 months of records.

Pro tip: You’ll probably be able to find a lot of this information just by logging into your bank account online.

List your sources of income

Now that you have your records in hand, look at all your income. The amount of money you bring in each month will fill the first column in your budget spreadsheet. Your sources of income may include:

  • Your salary or wages
  • Government/public assistance
  • Child support or alimony
  • Social security

Pro Tip: Instead of recording your gross pay, record your net pay. This is your “take-home pay,” or how much money is actually deposited in your bank account after taxes or other deductions.  

List your fixed and variable expenses

Next, look at all your expenses. The amount of money you spend each month will fill the second column in your spreadsheet. It’s important to consider both your fixed and variable expenses.

Fixed expenses are expenses that don’t change much month to month, such as:

  • Rent or mortgage
  • Auto or health insurance
  • Loan payments
  • Cell phone bill

Variable expenses are expenses that may go up and down, such as:

  • Groceries
  • Gas or transportation
  • Medical bills
  • Discretionary spending, like dining out or non-essential shopping

Pro tip: The “miscellaneous” discretionary expenses—like that latte on the way to work—are often overlooked. Many of us don’t realize how much we spend on these items!

Tally up and compare your income and expenses

After you’ve listed all your income and expenses, tally up the totals at the bottom of each column. Then, compare the two figures to each other.

If you have more income than expenses, you have a budget surplus. That’s great! This means you can sack away more in savings, increase the amount you’re paying toward debt, or maybe even afford a different car payment.

If you have more expenses than income, you have a budget deficit. This means you’ll need to take a critical look at your income and expenses and make adjustments.

Pro tip: Being in a budget deficit isn’t the best position, but there are ways to overcome the obstacle and better balance your budget.

Set a goal and make a plan

This is where you really dive into managing your money. Based on whether you’ve uncovered a budget surplus or a budget deficit, you can set a realistic goal. Deposit more money in savings each money? Make a bigger credit card payment? Reduce your non-essential spending, like eating out?

Gaining clarity on where your money is coming from and where it’s being spent will help you make the necessary adjustments to reach your goals.

Pro tip: Treat your savings like a fixed expense. Committing to setting aside a certain amount each month will help you save more consistently and build a bigger cushion for the future.

Review your budget monthly and make adjustments

It’s smart to set aside time each month to review your spending plan. Assess whether your income or expenses have changed. Did you get a new job? Move to a different apartment? Did you have to pay for an unexpected car repair or medical bill? Use your budget spreadsheet to make the necessary adjustments.

Pro tip: Reviewing your budget is a chance to check your progress toward your goals. On track? Then celebrate! A little off? Think about how to make tweaks.

No matter how you build your budget, Marine Credit Union has tools and resources to help. Our free online calculators can help you: