Starting a budget is not only a good way to start saving money, but is also a good way to identify how you are spending your money. When trying to figure out how to start a budget, it’s also important to note what your money saving goals are. It can be a short-term goal to build up an emergency fund, long term for retirement, or even temporary to save up for a Disney vacation. Once you’ve figured out what your goals are, it becomes easier to plan your budget.

To get started, you need to figure out what your take-home pay is after employer withholdings, taxes, insurance premiums, and retirement. For example, John Doe has a gross income of $60,000 a year, but his take home pay is $48,000 a year. After you figure out your take home pay, you then need to figure out how much you pay a month for housing, food, and other necessities. In John Doe’s case, let’s say he overestimates that it costs him $20,000 a year to pay all his bills, groceries and gas. That means that he really has $18,000 left over.

John Doe decides he wants to start saving budgeting for an emergency fund in case he loses his job. An emergency fund is around 70% of your gross income, or 3-6 months’ worth of pay. For John Doe with a gross income of $60,000, that means he’d have to save a minimum of $10,500. To figure out how much you’d need to save, let’s use John Doe’s math as an example

- ___$60,000____ divided by 12 months = ____$5000_____
- ____$5000_____ (last answer) times 70% = ____$3500/mo___

According to the math, he’d have to have at least $3,500 a month for an emergency fund. From here, you can start to formulate a budget strategy to work with.

Since he overestimated his costs of living expenses to $20,000, it would be good idea to leave some wiggle room within his budget for inflation just in case costs go up. At the current amount of $18,000 after his bills are paid, he figures out that he wants to start by saving $10,500 based on the calculations above.

- ___$10,500/yr____ divided by 12 months = ____$875/mo_____
- ___$875/mo____ divided by 4 weeks in a month = ____$218.75/week_____

Based on the calculations above, he can choose to place $875/mo or $218.75 a week in a savings account. Most people will not have that kind of cash lying around, but you can use the general idea to work with any amount of money, big or small.

*Do you budget your money? If so, what tips do you have to get started?*