9 Steps to Creating a Personal Budget

As anyone responsible for paying the bills is well aware, life is filled with a long list of expenses — both anticipated and unexpected. And of course, the best way to ensure that the needed funds are available to cover either of these is to have a substantial reserve of savings set aside. Further, for any consumer, building up a considerable amount of savings is one of the biggest keys to financial security and stability.

But for many Americans, this is all much easier said than done. Because, let’s face it, building up a large reserve of savings can be a formidable challenge.

9 steps to building (and maintaining) a budget

Fortunately, though, by creating a personal budget and sticking to it, consumers can gradually build up their savings and put themselves in a much better position to handle expenses both large and small. Consider these nine steps to creating and maintaining a household budget:

  1. Gather your financial documents — To get started, you’ll want to gather all of your financial documents such as bank statements, credit card statements, pay stubs, recurring bills, investment paperwork and even spending receipts. You’ll use all of the data from these documents in the two steps that follow — and the more complete the information you can gather, the better idea you’ll have of how much money you have coming into and flowing out of your household each month.

  1. List out your monthly income — Using the income-related documentation collected in the step above, create a list of all the income your household brings in each month. For workers who are full-time employees and receive weekly or bi-weekly paychecks, this step could be as simple as adding up the net income brought home (the dollar amounts seen on those checks). Households whose members have side jobs or any other means of extra income should add in any amount (after taxes) brought in there, too. For those who do freelance or seasonal work, a good rule of thumb here is to use the amount of income brought in during the past year’s lowest-earning month. Add up all of the figures in the list you’ve made to create a total for your monthly income.

  1. … and your monthly expenses — Next, create a list of all of your monthly expenses. This list is likely to include such costs as rent or mortgage payments, utility bills, groceries and other food, car payments, various types of insurance, gas and/or public transit fees, and entertainment — along with anything else you’ve spent money on over the course of the month. Add all of these expenses up to create a total for your monthly expenses.

  1. Determine your income standing — Subtract the expenses total calculated in step 3 from the income total calculated in step 2. Is the result a positive number? If so, this is a good starting point for strategizing a way to start saving. If, on the other hand, you reach a negative number in your calculation, you will need to make some more serious changes. (If your expenses exceed your income, you’ll need to find ways to bring the former down and the latter up in order to create financial sustainability and have opportunities to generate savings. While the flexible spending outlined below makes sense as the first place to target for spending cuts, having significantly more expenses than income may necessitate larger changes, such as moving into a place with lower rent or mortgage payments, finding a new job or taking on more work, or finding a less-expensive form of transportation.)

  1. Categorize your expenses — Examining the expenses list you created in step 3, separate your fixed and variable expenses. Your fixed expenses will be the ones that remain the same (or close to the same) each month, including largely set amounts such as rent or mortgage, utility bills, car payments, insurance, and gas and/or public transit fees. Your variable expenses, on the other hand, will be the ones that tend to vary from month to month, such groceries and other food, entertainment, and any splurges that you might find on the expenses list.

  1. Pinpoint your flexible spending — In the vast majority of cases, most of your flexible spending will fall into the expenses list created in step 3 — and many of the items here are likely among the variable expenses identified just above in step 5. Wherever it may have landed in the steps above, your flexible income is the easiest to control via budgeting and planning. For most households, this includes things like entertainment, dining choices (and especially dining out), and splurges.

  1. Adjust your budget — This is the step where you plan for changes that will give you more money to devote to savings. Start by focusing most intensely on the flexible spending pinpointed above. Are there obvious areas where you can make cutbacks, such as having fewer dinners out, or spending less money on splurges such as non-vital luxuries and expensive vacations? Are you really using those subscription services enough to justify the amount spent on them? Are your visits to the coffee shop a little too regular, and could you replace some of them by brewing your own?
    Making seemingly small changes can add up big over time. Identify any areas where you could consistently spend less, then set an informed target for the amount of money you’d like to instead contribute to your savings and/or paying down existing debt each month.
    A good rule of thumb to follow when setting your savings goal is known as the 50/30/20 budget rule. This concept sees roughly 50% of the budget devoted to essentials, 30% of the budget going to non-essential expenses, and the remaining 20% allotted to paying down debt and growing savings.

  1. Stick to the plan — Once you’ve set your budgetary goals, do your best to stick to them — and remember that the reason you’re doing so is to improve your financial security and stability. A few of the good financial habits to keep in mind here include:
    – Giving serious thought before making big (and especially any sizable, non-essential) purchases
    – Avoiding impulse spending on large purchases
    – Avoiding the accumulation of credit card debt whenever possible
    – Planning out weekly meals, and limiting dining out — especially when it falls outside of your budget

  1. Stash away your savings and/or pay down debt — If you can stick to the plan (and if no large, unexpected expenses arise), you should have extra funds available at the end of the month for paying down existing debt and contributing to your savings. Paying down debt should be your top priority, as doing so will help you avoid paying added interest fees. And to facilitate your savings efforts, you may want to consider opening a savings account so that you have a place to store your money away — while both reducing the temptation to spend it and earning interest on the sum.

Proudly serving South Carolina since 1933, Arthur State Bank offers accounts and services to meet a variety of financial needs. To help you achieve all your financial goals, the bank offers in-person service as well as a range of convenient digital solutions. To learn how Arthur State Bank can help you with banking needs ranging from checking and savings to retirement accounts, mortgages, other personal loans and more, visit arthurstatebank.com.

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Man doing his banking online

AnnualCreditReport.com is the only source for free credit reports authorized by the federal government. Every 12 months, you can get a free copy of your credit report from each agency.

Your credit report has your credit history for all of your credit accounts as well as any credit inquiries and public record court information such as collections. In addition, the report provides personally identifiable information such as your name, address, and employment.

Be sure to carefully review all three reports to identify any problem areas that you may need to clean up prior to applying for a mortgage. If there is any incorrect information, follow the reporting agency’s rules to correct it or add a notation to the report to explain the situation.

Your FICO Score is a score combines data from several areas include payment history, the amount owed, length of credit history, new accounts. Many lenders use this score as a guide. This score is not provided as part of the free annual credit report.

Learn more about how your credit score impacts your ability to secure a loan.


Couple looking over finances

Primary considerations for setting your housing budget require an assessment of your income, debt and current savings for the down payment on the home. The following are generally recommended guidelines; however, you should meet with an Arthur State Bank lender to get personalized mortgage information.


Couple meeting with lender

The pre-qualification/pre-approval letter is included with any offer you make on a house to inform the seller that you have met with a mortgage lender and you are prepared to make an offer. The letter states that based on certain assumptions, the bank is prepared to lend you up to a specified amount of money for a home mortgage.

When choosing a loan officer, we recommend going local to work with someone who understands your community’s real estate market. This blog on first-time home purchases includes questions to ask your lender that may be helpful when preparing for your meeting.

Helpful Resources:


Realtor shaking hands with a client

When a house is sold, the seller typically pays real estate commission to both the listing agent and the selling agent. It is extremely beneficial for the buyer to use their own real estate agent. Loan officers can often recommend selling agents in the area; ask your officer about realtor referrals when discussing your loan.

A good realtor will know the local market and can help you find an ideal home based on your budget, location and desired features. During your search, understand that you will most likely need to compromise on some items, so it’s important to identify your critical needs versus your wants.


Couple searching online for a home

Additionally, when you start with the house search and work backwards, homes can often go off the market while you’re completing steps 1-4. While browsing homes immediately can be tempting, we recommend following these steps in order so that, once you find your dream home, you’ll be well-positioned to take action immediately.

When you find the home you want and you think you are ready to put an offer on it, you will want to make sure you have all the information you need to make a solid offer.

  • Evaluate the neighborhood.
  • Drive by the house at different times of the day.
  • Examine how other houses in the neighborhood are maintained.
  • Consider any potential traffic or other disruptive noise.
  • Is there ample parking for you and visitors?
  • Read the details in any Homeowner Association agreements (HOA fees and rules).

Make sure to do a preliminary check of house details:

  • Check the water:
  • Does it have good pressure?
  • How long does it take to get the water hot?
  • Is it well water or city water?
  • Turn light switches on and off.
  • Open and close doors and windows to make sure they work properly.
  • Review previous utility bill expenses.
  • Consider the property tax bill.


Family meeting with realtor at new house

When writing an offer contract, be sure to pay attention to all of the details.

Offer Price:

Your agent should do a market analysis that pulls data on recently sold comparable houses. The best comparisons will come from the same neighborhood.

If you are asking for the seller to pay some of the closing costs, remember that this cost plus the sales commission determines the net amount you are offering the seller for the house.

Work with your agent on your negotiation strategy. There are many things to consider, such as how badly you want this particular house, whether it is a buyer’s or seller’s market and an assessment of the seller’s motivation to get the property sold.

There isn’t one best strategy.

Be sure to document in writing everything you want included with the house, such as appliances, etc. Your agent should guide you through the contract step-by-step.


  • Home inspection.
  • Mortgage.
  • Final walk through (24 hours prior to closing).

Proposed closing date. Typically, this is 30-45 days from an accepted offer.

A good-faith deposit is required for the offer. This is typically between 1-10% of the purchase price of the house. The deposit is kept in escrow until closing and the money is applied to the purchase price of the house at closing. If the house does not close due to one of the contingency clauses, the buyer receives their money back. However, if the buyer decides not to close on the property, the seller may get the deposit money.

Attach your pre-approval letter to the offer.


Two people in professional meeting

The clock starts ticking for everything documented in the contract, including mortgage application, inspections and closing date.


Woman advising other woman on mortgage application

You will need to decide which mortgage to select prior to the application.

Plan for the following potential fees:

  • Application fee (many banks and mortgage companies charge an application fee; however, there is not an application fee at Arthur State Bank).
  • Credit check.
  • Appraisal (may be paid at closing).
  • Loan origination fee (paid at closing).

Once you have approval for your loan, make sure you don’t change anything that will impact the status of your mortgage. Banks do a final check on credit and jobs just prior to closing, so now is not the time to change jobs or make another purchase on credit such as a car or furniture.


Home inspector going over findings with home owner

Depending on the size of the house, an inspection can cost on average between $300 to $1000.

Many real estate contracts specify how problems uncovered in the inspection will be resolved, up to a certain dollar amount. Should necessary repairs exceed that amount, the buyer has the option to cancel the contract without penalty and receive their deposit money back. Another option is for the buyer and seller to renegotiate who will pay for additional repairs.


Woman happily holding keys to her new home
  • Homeowner’s insurance is required by the lender prior to closing on the loan.
  • Turn on utilities in your name, effective the closing date.
  • Change your address with the U.S. Postal Service.
  • Make moving arrangements.

Three days prior to closing:

  • You should receive your final Closing Disclosure from the closing agency. The final Closing Disclosure shows a column for the seller and a column for the buyer. All closing charges and credits for both the seller and the buyer are documented in the closing statement.
  • Review the closing statement for accuracy prior to coming to closing.
  • The final amount in the buyer’s column shows you the amount of money you need to pay at closing.

The closing office will provide specific payment instructions. Closing funds have become recent targets for cybercriminals. If you are asked to use a wire transfer, call the office and ask to speak to someone you have been working with to double-check the instructions.

Closing day:

In South Carolina, the closing will usually take place at the attorney’s office. Everyone signing for the mortgage must be present to sign the closing paperwork. Make sure you bring the following:

  • Cashier’s check or proof of payment for wire transfer.
  • Driver’s license.
  • Checkbook, just in case there are any additional items that were not on the closing statement.

Be sure to understand this information:

  • How and when you will pay:
  • Your mortgage.
  • Your property taxes.
  • Your homeowner’s insurance.
  • Any HOA dues.
  • Who to call with any questions.

The best practice is to go through the homebuyer’s roadmap in this sequence. However, if you jumped ahead early in your journey, just circle back to address the steps you missed.

Arthur State Bank’s loan officers are closely tapped into local real estate markets and experts at helping clients get what they need on terms that work for them. We also offer mortgage specials for first-time homebuyers.

To start planning your journey to your dream home, try out our mortgage calculator. If you’re ready to talk to a loan officer, contact Arthur State Bank to request personalized mortgage information today. Don’t forget to ask about our first-time homebuyer offer.