Budgeting Basics for Wealth, Health and Happiness
Maybe not everyone needs a budget, but just about all of us can benefit from one. Here are the basics on why budgeting is important and how to get started.

Budgeting is the first step toward financial planning. It includes a series of questions about how you spend your hard-earned money. And being accountable for your inflows and outflows is a healthy exercise for strengthening your ability to save and plan for your future.
Having a budget helps us live within our means and avoid spending more than we make.
While it might take work at first, in the long run, budgeting will secure you the financial stability needed to acquire wealth, and equally as important, peace of mind.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
3 Good Reasons to Make a Budget
The importance of budgeting varies according to many factors. While not everyone needs to budget equally, there are essential situations to consider.
- Get Your Finances Organized. If your financial recordkeeping is a mess, you need a budget. You need to understand what the inflows and outflows are that got you into this mess and start to keep track of where your funds are going.
- Maintain Financial Goals. Create a realistic goal by living and subscribing to an initial budget. You can derive a true-to-life financial plan by learning what is affordable and what is not.
- Plan for Retirement. Everyone needs to budget for retirement. Paychecks will inevitably stop, and you will need to rely on Social Security, investments or a pension. The question is, how much do you need to retire? The answer is the amount required from your assets each year to live. And the only way to get that answer is by budgeting.
Setting a Budget Is a Good Habit
Creating a budget is always a good idea. But being accountable for your finances and spending habits may be daunting to some, while it comes naturally to others.
Keeping in mind that not all budgets are equal, here are some guidelines to get you started. The goal is to understand why and how to budget according to your profile.
Why You May Need to Create a Budget
It is wise to create a budget in various circumstances. Some of the top reasons to manage your finances are to:
- Stay out of debt.
- Understand retirement finances.
- Save for a significant expense.
- Understand what you can afford.
- Track where you spend money.
Those Who Do Not Budget
There are two distinct categories for those who need to create a budget and those who don’t. While both groups may benefit from financial accountability, the first group – those who are burying their head in the sand – truly need a budget. The second group – those who are considered affluent – could probably get away without one.
Those uncomfortable getting real with their finances generally have similar concerns. They often have much debt, are embarrassed by their lack of savings, may have a spouse who overspends, or, as the adage goes, may think “ignorance is bliss.”
On the extreme opposite end are the super-wealthy individuals who don’t have to budget. This group earns enough to save and spend at their discretion, has enormous assets, or has an inheritance. Thus they are not concerned with their current finances.
Where to Begin When Creating a Budget
Creating an effective budgeting strategy depends mainly on the individual. Some create spreadsheets and update them daily with what and where they spend, then reconcile these worksheets monthly to stay on track.
There are also budgeting software programs, such as Quicken or Mint, or proprietary ones created by financial advisers to attach credit cards and bank accounts. These services track and categorize your expenses, and although intuitive, they still require the human touch to assure accuracy.
Some people budget by setting up multiple bank accounts for designated monthly expenses, such as personal, home and savings. They pay into these accounts every pay period. Others used the very simple envelope budget method.
Then there is the automated budgeter. This person knows what they need to put aside for retirement and college savings and stays on track monthly and annually. From there, they spend the rest.
Next Step Is Financial Planning
Now that you have a general understanding of the importance of creating a budget, your next step is to make a budget yourself! You may also consider seeking the help of a seasoned financial planner. This person can help you invest the money you save, so you have more money over time.
The goal is to live your best life within your means so that when it comes time to retire, you may continue to live the quality of life you did while working. The best motto for retirement is to do so in wealth, health and happiness.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
In March 2010, Andrew Rosen joined Diversified, bringing with him nine years of financial industry experience. As a financial planner, Andrew forges lifelong relationships with clients, coaching them through all stages of life. He has obtained his Series 6, 7 and 63, along with property/casualty and health/life insurance licenses. Andrew consistently delivers high-level, concierge service to all clients.
-
Retire in Costa Rica With These Three Tax Benefits
Retirement Taxes Costa Rica may be a good place for retirement if you like the low cost of living and savings for your heirs.
By Kate Schubel Published
-
Five Ways to Ease Caregiver Stress
Caregiver stress is real. Here are five techniques to protect your health and happiness while caring for a loved one.
By MP Dunleavey Published
-
Financial Strategies Borrowed From the Big Game's Playbook
Like the best football teams, you can win at financial planning by executing a strategy, making halftime adjustments and staying focused on the ultimate prize.
By Frank J. Legan Published
-
Three Ways to Plan Now for a Social Security Shortfall Later
The outlook for Social Security is gloomy, but you can save now to protect against benefit cuts later. If the cuts don't happen, you'll still be better off.
By Tyler Jones Published
-
Extra Cash? Should You Pay Off Debt or Invest?
Depending on your financial situation, you might benefit from paying off debt, investing or both. Here are some things to consider before deciding.
By Anthony Martin Published
-
The Future of 1031 Exchanges Under Trump Looks Bright
As a real estate investor himself, President Trump appears poised to preserve the tax-deferring power of this strategy. But you still must follow the rules.
By Edward E. Fernandez Published
-
Gambling vs Investing: How to Tell the Difference
It's easy to get caught up in the excitement of placing a bet on the Big Game, but beware of letting that emotion drive your investing decisions.
By James Martielli, CFA®, CAIA® Published
-
Empowering Widows: Five Goals for Financial Security in 2025
Tackling these strategies one at a time, whether it's updating estate planning or reassessing investments, can help put you on track for financial stability.
By Stacy Francis, CFP®, CDFA®, CES™ Published
-
Private Credit: Coming Soon to a Portfolio Near You
Private credit could be a good source of diversification for sophisticated investors, but beware of the risks.
By Blaine Townsend, CIMC®, CIMA® Published
-
What Is Insurance Good For? Let Us Count the Ways
You might resent having to pay premiums, but when disaster or just a minor fender-bender happens, you'll be happy you have the financial backup.
By Karl Susman, CPCU, LUTCF, CIC, CSFP, CFS, CPIA, AAI-M, PLCS Published