by Prosperity Maine

In Maine, many people mark the New Year by resetting their financial goals and creating a new budget. But what is a budget? It’s an essential tool of money management, a spending plan that anticipates expenses and shows what is actually spent, thereby indicating where savings may be possible in the coming months. A good budget compares an anticipated spending pattern with the actual spending pattern at the end of each month and uses the information to improve planning for the next cycle.

All budgets are different because everyone’s financial circumstances are different. But building an effective budget follows a similar process for everyone.

How to Make a Budget:
Step 1: Write down a list of your monthly fixed expenses (rent, insurance, utilities, etc.), and variable expenses (gas, food, clothing, etc.). TIP: Include everything; use old receipts, bills, and any credit card or bank statements going back at least two months, and average the expenses.
Step 2: Write down the budgeted amount (how much you’d planned to spend) and then the actual amount (how much you actually did spend) each month.
Step 3: Record the difference between the two by subtracting one from the other. Was your actual spending less that you’d budgeted, or more?

This exercise can show you where you are spending the majority of your income and how much you must spend on necessary items each month.

Overspending in any category shows a need to rebalance the budget. Rebalance a budget by increasing income or decreasing spending.
For many people, decreasing spending is easier than increasing income. Two ways that make saving money easier over time are cutting back on “unnecessary” expenses (often entertainment or extra personal items and services) or searching for better prices on necessary budget items (transport, groceries, utilities). Fixed expenses (rent, mortgage, loan and medical payments) may be negotiated in some circumstances, but not all.

Increasing income can also make a big difference in a monthly budget. Offering to work overtime, getting an additional job, finding a new full-time job with higher pay, or starting a business on the side are common strategies. Using public services (libraries, parks, etc.) or entering trade and barter arrangements with friends or neighbors are other ways to reduce the need for more income. Public assistance programs and tax benefits also are available.

Some things to keep in mind when creating a budget:
• Overestimating is better than underestimating.
• Think through the difference between what you want and what you actually need.
• Be flexible. Life doesn’t always go according to plan.
• Be conservative with your spending.

Budgeting and other critical financial topics are covered in “Basic Money Management,” a five-session Zoom course from ProsperityME, created by immigrants and for immigrants. The first session of the new year will start on January 8, 2021. The course is offered free of charge. Register online at to become part of the next class.