By Treasurer David McRae | Guest Columnist

There is hardly a financial tip list out there that doesn’t start and end with: “Build a budget.”

But getting started can be intimidating! So, let’s see if, in the next few paragraphs, we can break the stigma of complexity and simplify this budgeting process a bit.

I might argue that one of the biggest mistakes first-time budgeters make is to overbudget. They have a different line item for clothes vs. household items vs. pet supplies vs. groceries vs. gas vs. housing — and everything else that could be added to that list. That’s simply too hard to track if you ask me. Let’s think about budgets instead by looking at four buckets: 1) Emergency funds, 2) Long-term savings, 3) Short-term savings, and 4) Day-to-day expenses.

Start first with your emergency funds. Experts recommend building a nest egg that could cover three to six months of expenses (this would include housing, food, health care, utilities, transportation, and debt payments). Those items are fairly easy to calculate by looking at your bank statement from last month. Once you have the number figured out, work on building toward that. This should be the first bucket of savings you seek to fill, as it will give you a financial cushion in the event of unemployment, a blown-out tire, or a home repair.

The next bucket is your long-term savings. For many Mississippians, this is an area your employer may help out with in the form of a 401(k) plan or pension. How much do you need to be putting away beyond that? Here, you might want to turn to Google. Simply type in “retirement savings calculator” and a number of great sources will pop up to help you find a number that meets you where you are and helps prepare you for where you want to be. Then, set your monthly savings on autopay.

Of course, the other large long-term saving most families will do is for college. Here is where the Mississippi Treasury can help. We have posted a calculator at Treasury.MS.gov/CollegeSavings. Your child is never too young to start figuring this out.

Once you’ve built up your emergency fund and have a clear understanding of what is needed long-term, you can start looking at moving funds into your short-term savings bucket. Anything out of your day-to-day may qualify, such as a big vacation or a new car. The most important thing here is to have a reasonable expectation of what these will cost, then divide it out into bite-sized monthly chunks. Consider setting up a separate savings account to make sure that money remains untouched and ready to use for your special event.

The last bucket is day-to-day expenses. This is the area where it’s easiest to blow your budget, so I always like to figure this one out last. Once you have set aside your emergency fund money, your long-term savings, and your short-term savings, the rest is yours to spend as you need (or want).

The tip lists aren’t wrong. Budgeting is the most important thing a family can do, but don’t overcomplicate it. Try to break your monthly allocations into these four buckets and start there. Of course, if you’re looking for more tips, tricks, and resources, please visit treasury.ms.gov/FinancialEducation.

Mississippi Treasurer David McRae is the 55th Treasurer for the State of Mississippi.