How to Make a Simple Budget (and stick to it)


Budgeting is one of those necessities of financial responsibility. In my opinion everyone needs to budget to some degree even if you may make a lot more money than you spend. I think people avoid budgeting because it can be so tedious. It’s annoying to watch what you spend but also it’s easy to get off track when you have no idea where you’re at financially.

A budget doesn’t have to be so strict or constraining, rather it’s a way to put yourself on track. You set savings goals, you get an idea of where you’re at with spending, and you try to stay in the ballpark of a certain amount of spending. Simple.

Write Down Expenses

The first thing you should do before making a budget is simply to figure out what you’re spending your money on. You should write down your expenses for about three months, then you can get an idea of the categories you’d like to make for your budget as well as the amounts you’ll allot. There are many wonderful apps that will help you track your spending including but not limited to: Mint, GoodBudget, Spending Tracker, or Fudget. Once you have expenses recorded you may be surprised to learn you’re spending a large percentage on things that aren’t necessities. You may also see that you tend to spend more in months when you make more. This is the value of writing things down. You can’t be in denial about what you spend your hard earned cash on.

A Simple Budget

Now that you know where your money is going the budget part is easy. You should have an idea of what you make per month. This sounds like a simple principle but you’d be surprised how many people have no idea. Obviously your budget should be less than what you make. If you’re paying down debts you need to make room for those just like regular expenses. If you spend a lot on particular categories then you should allot more to that category. Here we will use the concept of a “zero sum budget,” which means the total amount you make is the total amount you budget. If there’s excess money after you set your categories you assign that money to savings. Budgets are as individual as the lives of the people who set them and you shouldn’t try to constrain yourself to a number that’s unrealistic. That said, there might be areas you can cut that aren’t necessities. There are some main categories I use, feel free to make up your own. Heres an example:

Monthly Income: $3,500

  • Groceries $250
  • Gas $150
  • Eating Out $50
  • Auto $150
    • Insurance $100
    • Repairs/Maintenance $50
  • Healthcare $700
    • Insurance $200
    • Child Care $500
  • Debt $500
    • Credit Card $100
    • Car Payment $400
  • Rent $1,000
  • Gifts $30
  • Misc $70
  • Savings $1,100

This budget includes mostly everything you’re going to be spending money on. The most difficult part about budgeting is those expenses that occur randomly like car repairs or doctor visits. It can be difficult to predict what number to budget for your misc category. This is why you want to write down your expenses, that way you can adjust the category to fit what you’re ending up spending.

Another difficult part about a budget is to plan for expenses that happen only once a year or infrequently. For example, my car insurance only gets paid twice a year so my strategy is to take the total for the year, say $1200, and divide it up by month. Therefore my monthly budget for car insurance would be $100.

Other categories, such as gifts, you may not use every month. The app I use allows me to rollover money every month. That way, at the end of the year I have a reserve of cash to spend on Christmas gifts. Another useful thing about using a money rollover system is if you’re not using all of the money in a category each month, you can get a better idea of how much money to shift to another category or divert into savings. Savings is a category I include in my budget. Each money my savings adds up in my budget envelope and towards the end of the year I look at what my budget thinks I should have in savings vs. what’s actually in the bank. So far it’s been almost identical which shows my budget is probably spot on.

Sticking to it

A budget is like a diet in many ways. You do well for a while, then you start to feel proud of yourself, then you go spend a bunch of money. In my own life I’ve been guilty of being too strict with myself. I won’t budge on the budget. Over time I’ve learned that you need to enjoy your life and you need to make room for fun things in your budget otherwise you won’t stick to it. If you have to take tuna sandwiches to work every day and never go out to the movies or do activities that cost money, you’ll never stick to that life. That’s why my advice for sticking to a budget is to have cheat days, go have a little fun or set aside some money to treat yourself. In the long run you’ll be much more successful.

Most importantly, you need to remember to tailor a budget to your life instead of writing down idealistic numbers you’ll never stick to. I think one huge mistake people make is they try to live on peanuts and when they can’t achieve that they give up. Again, this happens a lot with diets. Give yourself a break, start out small, tailor a budget to your life and change it over time as you get better at it. As always, being smart about money is mostly about baby steps. You make small changes over time, and one day you realize you’ve changed your financial life.



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