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Set Up a Simple Budget From Your Bank Statement

4 min read

Summary: Your bank statement already shows where your money went. This guide suggests a way to turn one month of it into a simple first budget. Take as long as you need.

Why start with a statement

Most people guess their spending, and the guess is often off. A statement shows the real numbers. The US Consumer Financial Protection Bureau (CFPB) suggests reviewing your checking account or receipts when you track spending, and starting with one week at a time if the whole job feels like too much. Its budgeting page also says to record all of your income, list your bills and due dates, then build a working budget.

The steps below are our suggestion, built on that outline. You can use paper, a spreadsheet or a free printable.

Steps

1. Get one month of statements. Download or print the last full month for your main account. If you also use a card, add that statement.
2. Write down your income. List every payment in: pay, benefits, side income. Use what actually arrived.
3. Mark the fixed costs. These are bills that stay about the same: rent or mortgage, phone, insurance, loan payments. Add them up.
4. Mark the changing costs. Food, transport, eating out, shopping. Group each line under a simple heading. Five or six headings are enough.
5. Add the totals. You now have income, fixed costs and changing costs.
6. Compare. Subtract total costs from income. If the result is below zero, look first at the changing costs, because they are easiest to adjust.
7. Set next month's plan. Give each heading an amount, using this month as a starting point. Change a heading only if you have a reason.
8. Check it again in a month. A first budget is rarely right. The CFPB says to update your budget after a change in your job or spending habits.

Example (made-up amounts)

Alex's statement for one month shows:

• Income: 2,400
• Fixed costs: rent 900, phone 25, insurance 60, transport pass 70 = 1,055
• Changing costs: food 380, eating out 160, shopping 140, other 190 = 870

Total costs are 1,055 + 870 = 1,925. Income minus costs is 2,400 - 1,925 = 475.

Alex sees that 475 is left over on paper, but the account balance barely moved. Looking again, 140 of "shopping" was small unplanned purchases, and some cash was spent that never showed up. Alex decides to give 200 of next month's 475 a job, such as an emergency fund, and keep the rest as spending room.

Things to watch

• Missing items. Yearly bills may not appear in one month. The guide on sinking funds covers them.
• Cash. Cash spending will not show on a statement. Note it down by hand.
• Moves between your own accounts. Do not count a transfer from savings to current as income.
• Unusual months. If a month included a holiday or a large repair, use a different month, or average two months.

A note on limits

This is one way to start, not the only one. Your first version does not need to be exact. The aim is to see your money clearly, then adjust.