Island Savings

Creating A Budget

While the many applications and software tools available to track spending and manage budgets have made the process easier, the basics of budgeting have not changed. There are several steps you need to take regardless of whether you use an online tool or pen and paper to manage your money.


Five tips for making a budget and sticking to it

  • Track your cash flows—For each period (traditionally monthly but a pay period may be more intuitive) record the money coming in and all of your expenses. Separate your expenses into the items you must pay regularly (rent, utilities, insurance, student loan or car payments, etc.) and discretionary spending (entertainment, clothing, food, etc.). Use your online banking to review your transactions and account statement details so you can be sure you capture everything.

  • Determine your spending habits—Track your spending and get a picture of what your cash flow pattern looks like, you may find that you need to shift income around in order to meet your expenses. Once you’re satisfied with your projection, make a plan for several months or even a year—whatever time period you can accurately forecast your income and expenses for.


    Matching your budget cycle to your pay period will make it more in intuitive to see how much money you have remaining and better control your expenses. Even if you get paid every two weeks and some of expenses are monthly (utilities and rent for example), you’ll only need to make slight adjustments to make this work.

  • Review your budget regularly—Make adjustments to the various items in your budget as you gain a better understanding of your actual expenses. A budget needs some flexibility to deal with unexpected events, but if you are overspending continually from month to month you need to look at your discretionary expenses. Maybe your groceries are costing you more than you thought or you forgot to factor in your morning coffee routine? You’ll have to determine whether you have the funds to increase the budget to cover such items or exercise more self-control with your spending.

  • Create some goals for your budgeting plans—Do you want to pay off some debt or save for a big ticket item like a car or a down payment for a home? Make sure your goals are realistic and attainable—you don’t want to create a situation where you are feeling discouraged about not being able to meet your projections.

  • Be disciplined—Creating a budget is a great step forward in your financial life, but very few people actually follow through and stick to their budget. It can be daunting to face up to what you really do with your money. To run a successful budget, it is essential to be honest with yourself about what you’re earning and what you’re spending. You’ll likely have to make some tough choices along the way to achieve your goals.


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