Creating a budget – and sticking to it – is a rock-solid way to avoid financial mistakes, whether it’s racking up high-interest credit card debt, buying a house you can’t afford or not saving for emergencies.

If you’ve been thinking about drawing up a budget, here’s a rundown of why you shouldn’t put it off any longer and how to get started today, regardless of how much money you’re earning.

The benefits of creating a budget

If you’re struggling to put budgeting at the top of your to-do list, it’s important to recognize the key benefits.

With a proper budget in place, you will be able to rest easy knowing you’re prepared for short-term, unexpected expenses and that you are setting yourself up for long-term financial success. Instead of thinking of it as “budgeting,” reframe it to think of it as simply knowing where your money is going and maximizing your pathway to savings so that it can help you enjoy your life more.

That pathway looks a bit different for everyone, but there are some guiding principles that can help on the journey.

Simple budgeting plans

One of the most common budget blueprints is the 50/30/20 rule, which helps you divide your short-term spending plan and your long-term saving strategy into three basic categories: the products and services you absolutely must have, the activities and items you would like to have and the savings you need for a successful future.

For example, if you earn $4,000 after taxes each month, the 50/30/20 rule gives you $2,000 (50 percent), $1,200 (30 percent) and $800 (20 percent).

50 percent: Needs

  • Housing
  • Groceries
  • Transportation
  • Utility bills
  • Health insurance
  • Minimum loan payments

30 percent: Wants

  • Dining out
  • Entertainment (movies, concerts, subscription services such as Netflix and Hulu)
  • Vacations
  • Athletic club memberships
  • Shopping (clothing, jewelry and home decorations, for example)

20 percent: Savings

  • Emergency fund
  • Retirement fund
  • Investments
  • Any other long-term saving objectives

Another traditional budgeting tactic involves using physical envelopes. The envelope method helps you separate money for specific budget categories and physically connects you with your spending as you withdraw cash from envelopes.

The convenience of credit cards tends to create a disconnect that can lead to overspending. The envelope approach helps establish tangible limits. Once an envelope is empty, you must wait until the next month to spend more in that category.

5 steps to creating a budget

Here are five key steps to follow to create a budget.

1. Pay yourself first.

If you wait until the end of the month and try to save what’s left over, you’ll likely run into a major roadblock because there is rarely any money remaining. Instead, make saving your No. 1 priority.

It’s wise to stash between 10 percent and 15 percent of your income in your employer-sponsored retirement plan and your emergency fund. By contributing to a retirement plan and setting up a direct deposit from your paycheck into a dedicated savings account or money market account, your funds are automatically swept away from the temptation to spend.

2. Map out your spending.

After you put aside the money you want to save, it’s time to analyze how to live on the money you have left. Spending 30 percent of your monthly income on housing (including property taxes) is a good rule of thumb, but affordability is tougher when the housing market is hot. So, focus on your flexible costs. Compare auto insurance policies and phone coverage options, for example, to identify any lower-priced offers. And scrutinize the smaller expenses that are in your control, such as entertainment, dining out and subscription services.

3. Always be prepared to adjust.

Once you have an outline of your regular expenses, it’s important to recognize that those costs will rise. Prices for products and services will increase more frequently than your paycheck will, so you have to continually find a way to live within the confines of your net income.

For example, if your car insurance gets more expensive, where will that money come from? You will need to cut back or reallocate funds from one spending category to another. If you receive a raise, try to maintain the same spending levels so your savings can multiply.

4. Calculate the true cost of your debts.

When you’re thinking about how to budget, you will need to manage the tug of war between paying off debts and saving for tomorrow. Not all debts have the same urgency, however. For example, there is no rush to get the balance on a low-rate federal student loan to zero. Make the minimum payments on time to build your credit, but you might be better off contributing any remaining money to your 401(k), particularly if your employer provides a matching contribution.

Credit cards or personal loans with double-digit interest rates are a different story, however. There is an urgency to pay off this kind of debt as quickly as possible.

5. Make budgeting a regular routine.

Tracking your spending is not a one-time exercise. It needs to become a habit. There are plenty of ways to establish the routine, from entering your expenses in an old-school spreadsheet to downloading a budgeting app that can help you visualize your spending categories.

By keeping an eye on your spending and saving to hold yourself accountable, you can identify more opportunities to save money, repay debt and earn financial freedom.

How to budget for a low income

Thinking about a budget when you’re already stretched thin can feel overwhelming. Start by thinking about small ways to shrink your spending. Every reduction can add up to a big difference.

By making tough choices about your lifestyle – eliminating spending at restaurants, for example, or canceling streaming subscriptions – you can put yourself on a path to better financial well-being. And when you get your next pay increase or land that dream job, you can celebrate the fact that you’re already in the smart routine of saving as much as possible.

— Bankrate’s Libby Wells contributed to an update of this story.