Basics of Budgeting: What Is a Budget and Why Do I Need One?

By Benjamin Temin 

In our last blog series about money, we discussed having conversations about finances with the important people in our lives. We began by looking at ways that we relate to money and how our own financial habits develop. In this next series, we will address one of the most impactful ways we can start to gain control over our financial lives, reach our financial goals, and build our future: creating a budget 

Are you unsure what a budget is? Do you feel ambivalent about the whole idea? Scared of checking your latest bank statement? Have you tried to start a budget a few times, but it just didn’t stick? Then this series is for you.  

It is easy to look back at our expenses to track where our money has gone, in fact, expense tracking is a great way to build awareness around our spending habits. However, you can’t change the past. The power of budgeting is looking towards the future. It is a plan for the way we spend, save, give, and generally get our money to do what we want it to do – it helps us take control. 

There is more than one way to budget your money. Here are two popular methods: 

  • 50-30-20 rule. This is a simple formula where 50% of your take-home pay is allocated for essential needs like paying the rent or mortgage, utilities, and food. 30% is allocated for wants, such as entertainment and hobbies. Finally, the last 20% is allocated for saving or paying off debt. This method is an easy way for beginners and people who get bogged down by spreadsheets to start spending and saving more intentionally. Of course, it can be adjusted if you need to put more towards essential needs or towards debt/savings. 
  • Zero-based budgeting. This has been popularized by financial experts such as Dave Ramsey. Using this method, your entire income is ‘assigned’ to a category and nothing is left out. Categories will cover everything: needs, wants, charity, emergency fund, retirement savings, and beyond. It takes some practice to become comfortable with this approach and it is more detailed and time-consuming. However, it can be a powerful tool to curb spending habits while paying off debt or saving for a big purchase.  

Furthermore, there are many tools to support your venture into budgeting. Each one has different features; there is no one-size-fits-all: 

  • Popular apps such as Mint, Every Dollar, You Need A Budget 
  • Online banking platforms 
  • Microsoft Excel or Google Sheets 
  • And taking it back to the basics – paper and pencil

What is important is that you know what budgeting method you are using and that it works for you. For example, some people prefer to link their bank and credit card accounts to the budget software for real-time updates. Others like to enter transactions by hand because it helps them feel more connected to their spending.  

If you are already doing well with budgeting, share what works for you with friends and family… maybe they will be inspired or get valuable information. Whatever approach you choose, know that by planning what your money does and where it goes, you are on the right track towards financial wellness and success.  

Next in the series we will look at budgeting tips for a tight budget. Then, what you need to know about budgeting solo versus with a partner. 


Benjamin Temin is a Coordinator for Economic Sufficiency at Jewish Community Services. 

JCS is a comprehensive human services organization providing a broad range of services that meet the diverse, multi-dimensional needs of individuals and families throughout Central Maryland. To learn more, visit jcsbalt.org  or 410-466-9200.

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