How to Make a Budget

If you’re looking to get control of your finances the first thing we need to do is make a budget.budget

If that word makes you squirm and you assume that a budget means not being able to have fun anymore, please know that I felt the same way too. I can assure you though, after 3 years of making a new budget for each and every month, I’ve found that living on a budget has not been restrictive, it has been freeing.

It gave us permission to spend what we could afford which means there is no more guilt coming home from a shopping trip because the purchases are planned and budgeted for.


Wait…Did you Say Monthly Budget??

You did read that right. Yes, my husband and I make a new budget for each and every month before the month begins and here’s why you should consider it too:

  1. Some months we have 4 paychecks and other months we have 5. We want to make the most of our income each and every month, so by setting up a monthly budget we can be sure to make the most from that “extra” paycheck
  2. You may not have the same expenses every month. Although many of your fixed expenses will occur every month, other bills might not be due every month. My water bill comes in the mail every 3 months and thankfully I don’t need to plan a birthday party for my children every month.

computer budget

How to Make a Budget 

  1. Start with your total income: At the top of your paper, you will write down all expected income for the coming month.
  2. Subtract your fixed expenses: The first group of expenses I take away are the fixed expenses that pertain to the four walls, the expenses that allow me to continue living where I live and get back and forth to work. These include Mortgage/Rent, Utilities, Transportation (loan payment if applicable and fuel), Groceries, Minimum Debt Payments, Clothing.
  3. Subtract your variable expenses: These are the expenses that can change from month to month or are considered the nice to haves. Think Magazine/Newspaper Subscriptions, Personal spending money, Dining out, or Entertainment.
  4. Find out what’s left: This is the moment of truth, it’s time to subtract your fixed and variable expenses from your total income. If you have money left over, this is the money that you can use to put towards paying down debt or set aside for long-term savings.If you have a negative balance, it’s time to look at ways to cut your spending (link to future blog) or increase your income (link to future blog).

balance income and expenses

Bringing it all together:

Now admittedly, I’m a pen and paper type of budgeter. You may feel more inclined to create a spreadsheet. Regardless of how you prefer to budget, the important thing is that you are taking control of your finances and telling your money where to go instead of wondering where it went.

If you are a paper and pencil type, this is my all-time favorite template to use. If you think a spreadsheet might be more your style, you can watch my husband and I give you a quick tutorial on how to set up a basic budget using Excel.


Your Turn!

  • Are you a paper and pencil type or a spreadsheet type?
  1. I am new to the downsizing, simplifying life, and a budget was the first thing I did. I was shocked at what I was wasting each month. is my new best friend! It keeps track of everything and allows you to set a budget in each category. What I really love is how it integrates all of my checking, savings and bills into one place without manually entering them. There is one time consuming part, and that is gathering all the bills (including online logon information) but youbonly have to do it once. I recommend it far more than

  2. I use YNAB and love it! I started out with Mint but it only guessed at what I expected to receive and then tracked what I spent after I already spent it. YNAB is different because you only budget money you have already received and set priorities for where it needs to go. It helps that it has a mobile app so you can see where you stand when you are at the store. As you use it, you can easily look back and see where you have spent your money. It reflects reality with where you stand with actual money on hand at any given moment.

    YNAB requires a whole new mindset about budgeting and may not be for everyone, but if you use it like intended, it is life changing. It, too, integrates all your accounts in one place and allows for automatic downloads, but it is more effective to manually enter your transactions and use the downloads to match and catch any you missed so that you are paying attention to your spending before you actually spend the money. It reminds me of the Weight Watchers point system, but with money instead of food. The secret is to make you think about your money and set priorities before it ever leaves your wallet.

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