One of the first components in getting organized financially is to set smart goals.   

When you think about setting goals for yourself, focus on goals that are specific, measurable, attainable, relevant and timely. Being attainable is one of the most important attributes of a smart goal.  

Creating unattainable goals can set back your overall objectives, impact your cash flow, and discourage you from following through with the goals you have set. And keep in mind, many of your financial goals will take time to achieve.  

Budgeting is a complex topic that is hard to consistently get right month after month. With subscription services like Netflix, it is easy to automate your spending making it even easier to overspend.  

But budgeting is a necessary step when organizing your finances.  The very first step in creating a budget is to figure your monthly income. If you are budgeting with a spouse or partner, you’ll want to include their income, too. 

Now, let’s break down your spending into multiple categories. For this we are going to think about your budget in terms of percentages – not dollars.  

The first category is your essential expenses or your needs: housing (rent or mortgage), utilities, transportation, car insurance, student loans, groceries, and your phone bill all fall into this category.  

As a rule of thumb, 50% or less of your income should be allocated to your essential expenses. And make sure to identify any out of the ordinary expenses such as car maintenance and home repairs.  

After those essential expenses come your savings. Yes, savings are a part of a healthy budget. Break savings down into two categories: long term savings and short-term savings. 

You should allocate about 15% of your income towards long term savings, which go to your retirement plan or IRA. Allocate about 5% of your income to short-term savings like an Emergency Savings Account.  

When you subtract your essential expenses and savings from your income, you are left with what can be spent on lifestyle spending or wants. This includes things like dining out, entertainment, vacations, hobbies and gifts.  

Congratulations on building your first budget!