A realistic, workable budget is one of the most crucial tools in your financial wellness arsenal.

Starting Points

Your budget is your blueprint for keeping cash flow positive and sticking to your saving goals.

If you have a partner, it’s essential to have one overall household budget. That big picture is crucial for having a good sense, based on actual numbers, of where the two of you stand financially and how you plan to stay on track throughout the year.

Whether or not you have a partner, start your budget by listing all your anticipated monthly expenses. It can be helpful to divide them by how frequently they occur.

Fixed Versus Variable

For fixed expenses, such as rent, car payment, or phone, it’s easy to fill in the exact amount you know you’ll have to spend. On the other hand, with variable expenses, like groceries, the amount you spend will change each month. But based on what you’ve spent in the past, you should be able to estimate a reasonably accurate number for most weeks.

The next step is to compare your income to your expenses. To achieve (and maintain) a positive cash flow, you may have to adjust some of the variable expenses—which probably means cutting back or cutting some of them out altogether.

You should revisit your budget on a regular basis. Remember, it’s there to help you and not written in stone. It’s important to review your budget and make changes when your household income changes.

Spread the Wealth

If your budget changes because you get an influx of cash, maybe from a bonus or an inheritance, you may be tempted to use it to cover increased variable expenses, like eating out, travel, or the newest phone. Certainly, using some of the money that way is fine. But it’s also an excellent opportunity to pay down debt or to increase what you’re putting away in savings—either in an emergency fund, a retirement plan, or your investment portfolio.