Part of our build your own financial plan series

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Planning a 2022 budget, step-by-step

The past two years haven’t been what any of us expected. Your plans for spending and saving money may have taken a detour.

Are you ready to start looking ahead and planning a budget for 2022? We can help.

Your first step is setting financial goals—and prioritizing them:

  • Short-term goals: six months to five years
  • Mid-term goals: five to 10 years
  • Long-term goals: more than 10 years


Make note of the current savings you’ve put toward each. If you’re short money for a goal, how do you fund that?

Yes, the dreaded “B” word. (Budget.) Where can you cut back? What are your priorities? Because when you can “find” extra money to save and invest (and potentially grow), goals can become more attainable.

‘Back in’ to your budget.

“Some people resist doing a budget because they think it’s going to restrict them from spending the way they want,” says Stanley Poorman, a financial professional with Principal®. The reality is that most of us overspend just because we don’t have a focused plan.

Think of a budget as a tool that organizes your monthly cash flow to include your saving and investing goals. To ‘back in’ to it, you pay critical expenses first, and then decide what to do with the rest. That’s a shift in thinking. Poorman says rather than treating a budget like it’s a starvation diet, you’re putting yourself in control of an organized financial plan.


Picture of a man working on a computer.

Thinking beyond your budget? Learn how to build a complete financial plan.


How to make a budget—step by step

  • Use our downloadable budgeting to fund your goals worksheet (PDF) and jot down what’s coming in, what's going out. Look at recent bills plus bank and credit card statements to give you the facts.
  • Adjust. Prioritize. Revise, as needed. (Fixed expenses = bills you’re committed to paying, like a mortgage, car payment, or utilities. Discretionary expenses = those you have more control over, like clothing or hobbies.)
  • Make note of your monthly take-home pay. Subtract your new/revised budget. See what’s left that you could put toward your goals.
  • For each goal, check whether it’s fulfilled or needs more funding, and if it’s a “critical”.
  • Decide how much of the extra money you’ve found could be put toward your critical short-, mid- and long-term goals. Log it on the worksheet. Once you’ve made good progress toward your critical goals, start tackling the rest of ‘em.

Is your budget still coming up short?

Don’t panic. You can continue to look for ways to adjust your spending and saving throughout the year. For example, a good next step would be to focus on tax planning. (To learn more, read: “How to keep more money this tax season? These 10 tips can help.”)

Here are a couple more stories that may inspire you to think about your budget in new ways:

Of course, more income may mean faster progress, too. Depending on your circumstances, you may consider ways to increase what’s coming in. (Side hustles are big right now, and salaries in some industries are on the rise.)1 Just be conscious of whether you’re using any additional money to simply increase your standard of living or to meet your specific goals.

Next steps

  • Does your budget leave room to pay yourself first? Log in to check on your retirement savings and adjust your contributions as needed.

1Kiplinger Employee Benefits, “You may get a raise in 2022”  

The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice, or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment, or accounting obligations and requirements.

Investment advisory products offered through Principal Advised Services, LLC. Principal Advised Services is a member of the Principal Financial Group®, Des Moines, IA 50392.​

Insurance products and plan administrative services provided through Principal Life Insurance Co. Securities offered through Principal Securities, Inc., 800-547-7754, member SIPC and/or independent broker-dealers. Principal Life, and Principal Securities are members of the Principal Financial Group®, Des Moines, Iowa 50392.