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The Ultimate Budgeting Guide for Immigrants

7.5 MIN READ

Despite the level of education you may have, tackling your finances may still be a difficult or time consuming task for you. However, if you want to stop stressing out about your finances, you’ll need to take some initial steps to get started on the right path. One of the first things you should do is set up a budget. 

Budgeting will help you to get control of your income and spending each month so that you can implement more high-level savings goals. Without the information budgeting provides, you won’t be able to accurately create a retirement plan or reach any of the financial achievements you’ve set out for.

In this ultimate guide to budgeting, you’ll learn: what budgeting is, how to budget your income and control your expenses, how to set savings goals, and how to use automation to make budgeting easier.

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What is Budgeting?

Budgeting is the process of projecting, monitoring, adjusting, and controlling future income and expenditures. You can make a budget ahead of each month to track how much you are bringing in and how much you are spending. It is helpful to see exactly where your money is going.

Budgeting can give you incite into where you need to make changes. It’s important to set goals so that you can make changes to improve your financial situation. Overall you should aim to spend less, save more, and earn more.

Income

You should always start your budget by projecting your income for the month. 

Some examples of income include:

  • Income from your 9 to 5 job
  • Overtime income
  • Part-time income
  • Side hustle income
  • Retirement income
  • Dividend income
  • Alimony and child support

If you are self-employed and make a variable income, always budget for your lowest earning month. This will ensure that you do not overspend, but you can still make adjustments as the month goes on account for any increasing income fluctuations.

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Expenses: Discretionary vs. Non-Discretionary

The next step is to make note of every single expense that you pay each month on a recurring schedule. Additionally, you should add any one-off expenses that you will pay for that particular month. 

Expenses can be separated into two categories: discretionary and non-discretionary. They can also be considered as fixed or variable expenses. Fixed expenses are those that recur each month, meaning that they cost you the same amount of money every month. Variable expenses are those that you pay which change in price each month or even don’t need to pay for every month.

A discretionary expense is a fixed or variable expense that is not essential in your budget, but you choose to make the purchase.

Some examples of fixed discretionary expenses include:

  • Club Dues
  • Premium cable TV fees 
  • Video game subscriptions 
  • Smartphones

Some examples of variable discretionary expenses include: 

  • Vacations
  • Entertainment costs 
  • Child school and extracurricular activity costs

A non-discretionary expense is a fixed or variable expense that is essential to your budget in order to maintain your life.

Some examples of fixed non-discretionary expenses include:

  • Rent or mortgage payments 
  • Auto and health insurance premiums
  • Loan repayments

Some examples of variable non-discretionary expenses include: 

  • Utilities
  • Taxes
  • Food 
  • Home or car repairs

Both discretionary expenses and non-discretionary expenses must be considered when preparing a budget. Discretionary expenses plus non-discretionary expenses equal your total expenses. If you have an excess of income over your expenses, this can be used for additional savings. However, if you have expenses that exceed your income, it will result in you going into debt for your spending.

Your income is your most powerful tool, so make sure that you do not spend money on any unnecessary expenses. Go through your bank accounts and credit card statements to see what products, services, and entertainment items you are paying for each month. Can you cut down or eliminate any of them?

These are a few expenses to start with if you’d like to take them out of your budget.

  • Cable bill or online providers like Netflix and Hulu
  • Music services
  • Magazine subscriptions
  • Gym memberships
  • Amazon Prime
  • Going out to eat or buying coffee

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6 Steps to Creating a Budget

  1. Collect your income and spending records from the past 12 months.

  2. Categorize any recurring and one-time expenses by month to examine trends made in your spending.

  3. Set up and utilize a spreadsheet or budgeting tool to hold the data you collected.

  4. Subtract your income from your expenses. If you get a negative number, adjust your budget so that you spend less. If you get a positive number, this means that you have money remaining in your budget that can be allocated elsewhere.

  5. As the month goes on, you should compare your actual expenses to the budget. Make any necessary adjustments to stay on budget and make a note of changes so next month’s budget can be more accurate.

  6. Take a few minutes each month to see if there are any expenses that you can cut down on or eliminate so that you have extra money to further your financial goals.

Savings Habits

Knowing information about your saving and consumption habits can help you to create a more successful financial plan. If you have a habit of not saving, there are a few strategies that you can implement to change that. You can have the money directly deposited into savings before your paycheck is even received. This eliminates the temptation to spend the money instead, and you probably won’t even miss it since it’ll never hit your bank!

Your savings goals should be clear, measurable, timely, and realistic. Since you are setting up a budget, take this as an opportunity to redefine your financial goals or even to set new ones. However, keep in mind that past behavior is the best indicator of your future results.

Here are a few ideas for financial goals that you can make. However, make sure that you add clear goal amounts and when you want to reach them by.

  • Build an emergency fund equal to 6 months of expenses.

  • Save 15% of each paycheck towards your 401(k).

  • Contribute the maximum amount you are eligible for towards your IRA.

  • Pay off your student loans or consumer debt.

  • Make extra principal payments towards your mortgage, or save up a 20% downpayment if you are currently renting.

Budgeting your money will help you to get control of your finances so that you can reach these goals. Knowing exactly where your money is going will give you peace of mind because you understand that your bills are being paid and your savings goals are being met.

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Automate Your Budgeting

There are a few steps that you can take to make budgeting even easier. Once you create your first budget, chances are that you can reuse it each month thereafter with some minor tweaking for one-time expenses. Additionally, you can set up automatic payments for your bills and direct deposit for your savings. Many companies allow you to set up AutoPay for things like utilities, your mortgage, and more. Your automatic payroll deductions are a great way to accumulate money for retirement in your 401(k) and IRA, or even in a taxable account.

If a spreadsheet is your style, go for it! However, budgeting tools can really automate the process and take the hassle off your hands. You can copy your budget from the previous month and even make a few quick changes to accommodate any one-time expenses or income changes. They can automatically link to your credit cards and bank accounts to pull in your transactions as well. The only thing you’ll have to do is drag and drop them into your budget categories. 

Start Budgeting Today - Your Financial Future Will Change for the Better

Budgeting is an essential first step to getting control of your finances and setting up a financial plan. Without knowing where your money is going, you won’t be able to make plans for saving or paying off debt. While it can be a little intimidating at first, there are many budgeting tools that can do the work for you. Make budgeting a regular part of your monthly routine, and you’ll reap the benefits of a more successful financial future.


MYRA Wealth provides personal finances for international and multicultural families in the United States. Our services include financial planning, investment management, and tax preparation. 

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