The [Realistic] Guide to Setting a Budget


There is always something to do in Los Angeles! From fine dining to local bars and restaurants to top-class shopping, there’s no shortage of activities on the streets of LA!

But these activities and experiences cost money. While it can be hard to resist an invitation out to eat or a shopping excursion, setting a budget can help you have fun without breaking the bank.

Keep reading to learn some budgeting basics and tips for how you can stay on track while still having fun.


Sure, you’ve heard the term “budget” but do you really know what it means? And do you actually need one?

A personal, or household, budget tracks money in versus money out. In other words, a budget will show you how much money you bring in, then compare that to your required expenses and your discretionary spending. If you want to keep tabs on your spending, manage your savings, and work toward financial goals, you need a budget.

Consider this:

  • Setting a budget helps ensure you have the funds to pay for what you need versus what you want. By planning ahead, you can save future goals and major purchases.
  • Setting a budget helps you have fun without the guilt! If you set a budget for your needs, you have an idea of what you can spend on what you want.

So you can see the value of a budget. But how do you go about setting one? Let’s find out!


Setting a realistic budget requires you to be honest with yourself about what you are spending and why. With a clear picture of your needs, wants, and future goals, you can establish a financial game plan that works for you.

Determine Your Income

First things first, how much are you bringing in? 

If you get a regular paycheck, use the net income amount. But, if your monthly income varies, you’ll have to figure out an average. If you’re self-employed, have any side gigs, or bring in additional revenue (child support, Social Security, etc.), be sure to include those amounts as well.

Consider Your Spending

The next step is – you guessed it – figuring out your expenditures. The best way to do this is to create a list of expenses and then organize them. You will probably notice that expenses can be grouped into two main categories:

  • Regular expenses: Regular or fixed expenses are fairly similar from month to month and include things such as rent, insurance, utility bills, and the like.
  • Incidental expenses: Incidental or variable expenses can vary and are thus usually a bit more challenging to pin down. These expenses include groceries, entertainment, repairs, etc. You can take a look at your spending over the past few months to determine an average.

Do the Math

Now that you have an idea of what you earn and spend, it’s time to crunch some numbers. Ideally, you want what you bring in to be more than what you put out. This lets you put money toward other saving goals or discretionary spending.

If the two figures are close or if you are spending more than you earn, you’ll need to look for ways you can cut back, especially if you want to make saving a priority.

Remember that you should try to bake in a little wiggle room into your budget. This comes in handy if you spend less than expected one month or need a little more another month. If you have some breathing room, you can balance out the difference between months.


Setting a budget can be as simple as looking at the numbers you calculated and setting spending and savings goals that fit with your priorities. But, if you need a little more structure than that, some budget plans can help.

The 50/30/20 budget

The 50/30/20 budget does exactly what it advertises: splits your budget into 50%, 30%, and 20% pockets. Under this plan, 50% goes toward necessities, 30% to wants, and 20% to savings and debt repayment.

If you master this way of budgeting, you will be able to manage your debt, occasionally spend money on some extras, and save for the future. A bonus is that it’s flexible. If you have more debt, you can adjust the percentages to better align with your circumstances.

The Envelope System

The envelope system is a cash-based approach to help limit your spending. The premise is this:

  • You plan out how you’re going to spend your money each month and use an envelope for each spending category. Withdraw as much cash as you need to fill each envelope based on your budget.
  • When you have a bill or expense, take the cash out of the appropriate envelope.
  • If you run out, that’s all you can spend in that category for the month unless you want to take cash from other envelopes. But this isn’t a good idea because it can cause a snowball effect and leave you in a bind at the end of the month.

This plan is beneficial if you need a rigid system where you can see the cash you’re spending. But it’s not a good route if you use other forms of payment, such as credit or debit cards, more than cash.

Pay Yourself First Plan

This type of budgeting is sometimes known as budgeting in reverse. It puts savings before immediate expenses. You decide how much to set aside for savings goals and then use the rest for bills and other costs. 

If you struggle with saving or feel overwhelmed focusing on each budget line item, this may be the plan for you. You put away what’s important first – money toward your savings – so you can spend the rest of the money how you see fit. 

The Zero-Based Budget

The zero-based budget plan can be summed up as follows: your income minus your expenditures equals zero by the end of the month. In other words, you account for every dollar of your monthly income. 

If you’re an overspender or find budgeting challenging, this may be the plan for you. But it can get away from you if you don’t keep close track. It’s also best for people who have a regular income versus one that changes from month to month.


Knowing the how and why of setting a budget doesn’t make it any less challenging. That’s why Foothill Credit Union is here for you. 

Not only are we here to help you with savings accounts, checking accounts, credit cards, and personal loans, but we can also help with financial education and other resources. 

Don’t worry if you’ve already let your spending habits veer off path, Foothill’s Financial Education partner, GreenPath can help you get back on the road to budgeting and saving. But don’t worry, watching your budget doesn’t mean you have to eliminate having fun. 

 For example, it’s a smart idea to save money but in LA – with the glitz and the glamour and the temptations to spend – that can be difficult. Let us help you keep to your budgeting goals and save money while living in LA – but still have fun doing so!

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