girl working on her budget
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Budgeting 101

You’ve probably heard of a budget before and been told how important budgeting is to managing your finances. But, has anyone ever actually explained what a budget is, how to make one, and how budgeting can help you meet your financial goals? 

No? They really should teach this in schools.

Keep reading to learn what a basic budget is and how to make one so you can take control of your finances.

What is a budget?


A budget is a plan for your money. It’s going to show you how much money you think you’ll make and compare it with what you think you’ll spend on your necessities (housing, food, insurance) and discretionary or fun spending (concerts, vacations, clothing). 

Budgeting is important because it enables you to ensure that all of your needs and hopefully a few of your wants are met. In the beginning it takes some getting used to, but it can lead to some major pay offs. Budgeting can help you get your spending under control, pay off debt, save for a vacation, build your emergency fund, and work toward other financial goals. 

Maybe you’re thinking that making a plan for your money sounds harsh and restrictive. Here’s the thing, it doesn’t have to be. Think of your budget as a permission slip to spend your money on what you care about, instead of willy-nilly without knowing where your money went. And yeah, we just said willy-nilly to make sure you’re still paying attention. Let’s do this. 

How to Make a Budget

Before you build your monthly budget, you’ll need to gather some information to get you started. Here’s what you need: 

  • Bank account statement
  • Investment account statement
  • Any recent or recurring bills
  • Your regular paycheck
  • An estimate of your variable expenses (groceries, that Sephora haul, tickets to see the latest Marvel movie)

Round up all this information before you build your budget. 


hand holding calculator about to budget

Budget Examples

Two of the most popular budgeting methods are the 50/30/20 budget and the zero-sum budget.

In the 50/30/30 budget method, 50% of your income is for needs, 30% is for wants, and 20% is for savings and paying off debts like your credit cards, car, or student loans.

With the zero-sum budget method, every dollar has a job so your income minus your expenses equals zero. That’s right, you get to “spend” every dollar! 

50/30/20 Budget Method

Let’s break this down. If you make $2000 a month and want to use the 50/30/20 budget method, your budget would look something like this: 

$1000 to necessities 

$600 to wants

$400 to savings and debt repayments 

Zero-Sum Budget

If all those percentages don’t work for you, the zero-sum budget method might make more sense. 

If your income is $2000 a month, then you’re giving all $2000 a “job” —covering bills, hitting savings goals, paying off debt, and living your life. At the end of the month when you track every dollar that came in and every dollar that went out, you should end up with a big fat zero. It’s important though that your bank account never hits zero. Always keep an amount of money in there, maybe $100-$500 depending on what feels good to you. 

Budget Tips 

The hardest part of budgeting is keeping up with it! Thankfully, there are a ton of budget apps and spreadsheets that can categorize your income and spending for you or help you do it yourself. Your bank may even have a budgeting tool that comes with your account! 


Balance Your Budget Weekly

Do your best to balance or update your budget every week so you stay on track. Balancing your budget weekly will make it easier to adjust if you need to because an unexpected expense came up like the engine on your car going out or spending too much at happy hour with friends. 

Figure out your After-tax Income

If you get paid regularly, your paycheck probably already includes your after-tax income.

But, if you freelance or have a side hustle, you’ll want to figure out your tax rate and account for any business expenses so that you know about how much you actually get to keep from the invoice that just cleared.

Automate Your Savings

If you can, automate your savings so that your money gets where it needs to without a lot of effort from you. You’re human and are bound to forget things or get tempted to buy something you didn’t budget for. If your savings and bills are automated then you won’t have to worry that the coffee you picked up on the way home is eating into your rent payment for next month. 

Update Your Budget

Your income, expenses, cash flow, and financial goals are going to change as you grow and change. Be sure to adjust your budget accordingly, because you never want to have a budget that doesn’t fit your priorities.

Use a Debit Card

Stay on top of your budget by using Extra, the first debit card that helps you build credit. Budgeting is all about making sure you’re spending at or below your means. Spending from your debit cards means you’re spending money that you already have instead of borrowing money (via credit) that you’ll have to pay back. If you’re worried about building credit or improving your credit score, remember that Extra helps you build credit history responsibly. 

Budgeting may seem overwhelming, but it doesn’t have to be. Pick a budgeting method that works best for you and try not to let budgeting stress you out. Remember, your budget is a tool that can help you start saving so you can find extra money now and build long term wealth for the future. 


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