A young woman in her early 20s riding a chopper cycle.
Karan Kapoor | The Image Bank | Getty Images
Having a strong budget can help you build financial wellness.
“A budget is a picture of what your money is doing,” Tiffany Aliche, also known as The Budgetnista, told CNBC during a Women & Wealth livestream.
“It’s the foundation where you build your financial house. You have to understand what your money is doing,” said Aliche, a personal financial educator and author of “Get Good with Money.”
By examining what you spend and setting a budget, you may find the cash to build other financial safeguards, such as an emergency savings fund and retirement contributions.
“You’re supposed to give each dollar a job,” said Sophia Bera Daigle, a certified financial planner and the founder of Gen Y Planning in Austin, Texas.
It might also be good to think of your budgets from an annual perspective. Taking on a new, big expense like a car or house, or even experiencing the occasional emergency, can affect your monthly spending, said Daigle, who’s also a CNBC Financial Advisor member.
Three steps to start a budget
1. Make a list of expenses: The first thing to do is write a list of all the things you spend money on within a given month, said Aliche. “That’s step one.” Consider expenses that are fixed, such as your rent or car payment, and those that are variable, such as groceries and utilities. It can also help to list out expenses you don’t pay every month, such as annual memberships or quarterly taxes.
2. Check your records: Next, see how those estimates match up to what you actually spend. Pull up your recent debit and credit card statements, and add up how much money you spent in a recent month.
3. Figure out how your spending matches with your income: Once you know how much you spend on a monthly basis, find the difference from how much you earn. Aliche calls this “the tears and tissues” step because many people realize they are overspending.
A lot of people hold onto the financial mistakes they made in their life, said Aliche. Don’t let the “tears and tissues” budgeting step derail you.
“Shame shields solutions,” she said.
To progress, lean on your community for emotional support and accountability. Figure out how to adjust your spending to bring your budget in line and give you room to meet your goals.
Also, “understand that money is a team sport,” said Aliche. You need a “board of directors” to help you reach your goals, such as an accountability partner, an accountant and a financial advisor.
SIGN UP: Join the free virtual CNBC’s Women & Wealth event on March 5 at 1 p.m. ET, where we’ll bring together top financial experts to help you build a better playbook, offer practical strategies to increase income, identify profitable investment opportunities and save for the future to set yourself up for a stronger 2024 and beyond.