How to Start a Budget (And Stick to It)

How to Start a Budget (And Stick to It)

September 23, 2020

Tagged As: Personal

So you’ve decided to get serious about your financial wellness. The first step is one you’re probably already aware of: starting a budget. But though it is well-known, many people find it hard to create a budget that accurately captures their spending. Others have a hard time actually following the budget once they’ve created it. We’re here to help you solve both of these problems.

Budgeting Basics

First and foremost, building a budget means tracking your income and expenses. This boils down to how much money you have coming in, and how you’re spending the money you have. Using those two factors, you can compare your resources with the amount of money you spend on a monthly basis and plan what you expect to spend in the future. It also allows you, if necessary, to determine where you can cut costs so you can save, invest, or get out of debt.

You can track your income and expenses manually, but we recommend using an app or digital service to automatically capture your cash flow. When you don’t have to spend time and energy to track your spending, you’re more likely to keep doing it. Many personal finance apps are free to use, like our Manage My Finances tool available through Hills Bank Online.


In most cases, income comes from salary or wages, government benefits, such as Social Security, and investment income. You may also have savings to draw on, or gifts from family members. But income can be variable, which is one of the reasons that budgets are not set in stone. Earnings in particular frequently change: most people expect that earnings will increase over time the longer they are in the working world, gaining more experience and earning power.


Just as fast as income arrives, money goes back out to pay for a seemingly endless list of expenditures, including housing, utilities, phone and internet, transportation—and that’s just basic monthly expenses. There’s also insurance, healthcare and child care, credit card bills, groceries, and clothing, among countless other things that chip away at income.


In addition to the funds going out to pay bills, expenses that should be built into a spending plan are set amounts – ideally figured as a percentage of your income – to build a savings account, grow an investment portfolio*, and plan for retirement*.

*Investment products and retirement accounts are not a deposit, not FDIC insured, not insured by any federal government agency, carry no bank guarantee, and may go down in value.

The more you save now, the more interest your account will earn over time, thanks to compound interest. Even though you may not have a lot of money now, time is on your side! Consider saving as “paying yourself first” and include it as a part of your monthly budget.

How to track your cash flow

Your personal cash flow, or how your money moves from income to expenses, can be calculated as follows:

  1. Record your monthly income.
  2. List your fixed monthly expenses.
  3. Calculate non-monthly fixed expenses, or bills that you pay every quarter, six months, or year. Then break those down into their monthly equivalents to help prepare for them.
  4. Compile a list of your variable monthly expenses.
  5. Compare what’s coming in with what’s going out.

Once you’re confident your income and expenses are captured accurately (and, ideally, broken down by category), it’s time to review them. Are there any areas that surprise you? Finding expenses to reduce right out of the gate can help motivate your budgeting efforts. Set realistic expectations for spending on flexible expenses, such as:

  • Entertainment
  • Fitness (gym membership, equipment, etc.)
  • Groceries
  • Restaurants/Take Out
  • Saving for vacations

Once you’ve figured out where your money is going, the next step is to ask yourself where it should be going. Many of the same apps and tools used for tracking your cash flow also include a budgeting component, and can even automatically create a budget for you based on your needs. Of course, the hard part is actually following your budget, but doing so is one of the best ways to build savings over time.

How to stick to a budget

Now that you have your budget, are you able to follow it? It’s easier said than done. Here are our top tips for following a budget in your daily life:

  • Automate the process: As mentioned above, anything you can do to automatically track your income and expenses and categorize them accurately can do wonders for your motivation to follow it. Keep your budget working like a well-oiled machine! You can even use Hills Bank Online to automate your savings expenses with Goals.
  • Write down your purchases: Is impulse buying a problem? One way to help is to actually keep track of everything you buy. When you see the list of things you’re spending money on, instead of making a decision in the moment and forgetting about it later, you can get a better view of the bigger picture; which can help you cut down where necessary.
  • Create a cash allowance: The power of plastic can be tempting. If you rely on your debit or credit card to the detriment of your budget, try restricting yourself to an allowance of cash that you withdraw from your account each week. If and once you run out, you know it’s time to take a hard look at your spending until it’s time for next week’s allowance.
  • Keep your goals in mind: You’re not budgeting to punish yourself. You’re doing it to create a secure financial future for yourself (and possibly your family).
  • Have more than one bank account: There’s a lot of truth to the phrase “out of sight, out of mind.” If you get in the habit of only spending money from your checking account while your savings account steadily grows, you might find it easier to save.

Do you have questions about your particular financial situation? Our bankers are here to help. Simply chat with a banker through or within online banking. You can also open an account or apply for other financial products right from your smartphone. Or, stop by one of our 19 locations to speak with a banker in person.

Whichever option you choose, we’re here to help you build a solid financial foundation for your future.