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How to Create a Budget That Works

By on Feb 21, 2013 in Budget | 13 comments

Budget with Calculator

Why not create a budget today?

I had someone ask me recently, “How do I put together a budget?” It dawned on me that budgeting is not a straight forward process. It does take some explaining as well as trial and error to start to get the hang of it.

Here is how to create a budget:


1. Gather All of Your Financial Data

This includes bank statements, credit card statements, or any other paperwork that shows your monthly expenses and income. We actually use an online service called to track our non-cash expenses. It is a free service that will link all of your financial accounts to one place so that you can see your entire financial picture on one page. This takes a lot of the nitty-gritty detail work out of the equation. Instead of needing to add up all of my vehicle expenses for one month, Mint automatically categorizes those purchases for me. All I need to do is go in and make sure that they are categorized correctly.

2. Begin Adding Up All of Your Income and Expense Items

Whether you manually add up all of your items or let a software program do it for you, this is how you begin to expose any weak areas of your budget. For instance, you may add up your grocery expenses and realize that you spend $700/month at the grocery store. If you are looking for an extra $300 per month to save, pay off debt, or invest, this would be an area you could cut back to achieve your financial goals. If you are looking for ideas, see this post by Lydia at called 4 Things I do to keep our Grocery Budget at $200/mo. for a Family of 4.

3. Enter Those Totals on a Piece of Paper

What Kim and I used when we were paying off our debt was what I like to call the Financial Gameplan form. There are 3 tabs on this form. The first tab is instructions on how to use the spreadsheet  The second is the actual Financial GamePlan form where you will enter most of the data. The third tab is where you can enter the detailed expenses of a given category like groceries, vehicle/gas, etc. On the 2 tab you will put the monthly amount you spend in a given category. You should also do the same for your income. If you get paid twice a month than put look at your paycheck and multiply your take home pay times 2. For example, if your take home pay is $1,000 every two weeks, then your monthly income you put in is $2,000 ($1,000 x 2).

4. Involve Your Spouse or Significant Other in the Budget Process

This is one of the most important aspects of doing a budget. If your spouse isn’t involved in the budgeting process than it would be very easy for them to spend more every month. Sit down with your spouse and as a couple decide the amount you will budget for each category. There will be areas where he/she will want to spend more, so be flexible.   The objective isn’t to live on as little as possible. You want to have a budget that works for both you and your spouse and that helps you achieve your financial goals. Download our Couples Guide to Money to help you through this process.

5. Keep Your Goals in Mind

Ask yourselves, “what do we want to accomplish financially?” Do you want to have an emergency fund? Maybe you want to save for your kids college or perhaps you want to invest more for retirement. When you are doing a budget, these goals help you to remember “Why” you are doing one in the first place. (See the Importance of Setting Goals)

Are you more of a visual learner? Here is a video to help you with the budgeting process.

How to Create a Budget in 10 Minutes or Less

Have more questions about budgeting? Ask me by clicking here.


  1. These are all great tips! I know of so many people who do not know how to correctly make a budget.


    February 21, 2013

    • Thanks Michelle! It is so true, in fact we didn’t really know how to budget when we got married. Hopefully this will give people a good place to start.


      February 21, 2013

  2. I totally agree with every point you made! And a budget doesn’t have to be fancy. I still do ours with pen and paper. We don’t even have a spreadsheet or anything! All that matters is that you make a budget and stick to it!


    February 21, 2013

    • Sticking to it can be the hard part, but it is definitely worth it!


      February 22, 2013

  3. Thanks for this, Deacon. I have read many posts on creating budgets (and should probably create my own post soon) but this one hammers home the good stuff. Thanks for helping remind me!


    February 21, 2013

    • Absolutely Tony, glad you found it helpful.


      February 22, 2013

  4. Right now bf and I do our budgets separately because we’re not married. But communication about finances is still really important since we own a place together and share expenses together. Once we’re married we’ll probably completely merge the budgets into one.

    KK @ Student Debt Survivor

    February 21, 2013

    • Yeah, I think you have a good strategy to keep separate budgets until you are married. However, I would make sure that you are aware of your boyfriends financial details. That way there are no surprises :)


      February 22, 2013

  5. Sometimes, you just need a push in the right direction to start budgeting, but it can only be helpful when you start. Good post. Sometimes the basics are hard to wrap your head around, too. I think it’s very important to gather your bank statements so you actually know what you’re spending.

    Daisy @ Young Finance

    February 21, 2013

    • Hey Daisy! You are right, the basics can be hard to do when you are getting started. Now that we have been doing this for a while, it is definitely easier than it used to be.


      February 23, 2013

  6. I love these tips. Creating a budget is such a daunting task especially for a mom and a wife. This post surely helps a lot.

    Sarah Park

    February 24, 2013

    • Thanks Sarah! Glad that you found it helpful.


      February 25, 2013

  7. Long term goal is the key in doing the budget. Thanks for the tips. Now Im using an iPhone app to manage my monthly budget and it’s very useful so far.


    December 4, 2013


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