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You are here: Home / Budgeting / How to Create a Budget That You Will Actually Use

How to Create a Budget That You Will Actually Use

May 5, 2015 | 24 Comments

Spending plan, cash flow plan, budget.

I don’t care what you call it.

You need to have a plan for your money.

My husband and I have had a budget every single month since August 2013, and since then, we’ve paid off more than $87,000 of debt on a single, middle class income.

If you’re serious about getting out of debt, the best way to do so quickly is to live on a monthly budget. This is how you will ensure that you’ll spend less than you earn so that you have room to pay extra toward your debt.

[bctt tweet=”If you’re serious about getting out of debt, the quickest way is to live on a monthly budget.”]

You’ll use your budget to allocate your expected income for the month across your various expenses and determine how much extra you can realistically pay toward your debt. Every single dollar will have a home, and you’ll know that you’re being smart with the money that you work so hard to earn.

Remember, you are in control.

You decide the numbers so living on a budget doesn’t mean that you can’t buy organic food or enjoy a nice meal at your favorite restaurant. It means that if or when you do those things, you’re doing so with intention. You’ve planned ahead to make sure that you have the money to cover those expenses.

Free Download
Here’s a Free Template

To help you get started, I have revised the budget spreadsheet my husband and I use into an easy-to-understand template. In this free download, I have put each month on a separate tab so you can start budgeting any time of the year.

Or, if you prefer the pencil-and-paper method, I have a budget worksheet that starts on page 10 of the workbook in my free guide, Jump Start Your Way Out of Debt. (Instructions for the worksheet are on page 9 of the eBook.)

Once you’ve downloaded the spreadsheet, follow these steps to start budgeting!

    1. Go to the current month’s tab, and review the categories and budget items listed. Edit them appropriately to accurately represent your expenses. Reference your Non-Monthly Budget Busters spreadsheet to be sure you don’t miss anything.And if you’re using the Debt Snowball method for paying off your debt, then list your debts in the order of your debt snowball.
    2. Enter the payment frequency and due date for each item in the purple column. You’ll find some of this information on your Non-Monthly Budget Busters spreadsheet.
    3. In the yellow column, enter the monthly amount for each item. For the Non-Monthly Budget Busters, enter the payment amount if you plan to pay as they occur or the monthly amount if you plan to save ahead. For items with payments that vary from month to month, such as utilities, I enter the monthly average of what we paid during the last year. For any items that don’t pertain to you, just leave the amount as $0.00.

This column is for a quick reference when preparing your budget each month.

    1. Once you’ve updated the first four columns, you can now copy these into the tabs for the other months.
    2. Next, enter your expected net income for the month in the green “Paycheck Total” box under the “Budgeted” column. Add any other income you expect to receive in the green box labeled “Other Income.” The spreadsheet will add the two income amounts together to calculate your total expected income for the month.
    3. Then, reference your monthly payment amounts in the yellow column and enter the fixed payment amounts for the month in the green column. Examples would be your mortgage, cable, and Internet.
    4. Next, enter your goal amounts for the other non-debt items (like food and gas) in the green column. You’ll be creating a new budget for each month so think about what numbers are realistic for this month.Perhaps you found while tracking your spending that you spend $700 each month on groceries. Maybe this month you want to try to pare that down a bit, but you still want to be realistic, so you enter $650.

Don’t forget to include your monthly savings amount for gifts from your Gifts Budget.

The spreadsheet will automatically calculate the total amount for each category in the “Category Total” column.

  1. Now it’s time to enter your debt payment amounts. Assuming that you’re using the Debt Snowball method, enter the minimum payment amounts for all of the debts with the exception of the smallest debt.The spreadsheet will automatically total everything that you have entered in the budgeted column in the “Total Expenditures” field at the top. It automatically subtracts this amount from your total expected income for the month and provides you with the remaining “Amount to Allocate.”The difference between your total expected income and your total budgeted expenditures is what you can put toward your smallest debt for your debt snowball. If you have a negative number in the “Difference” field, then you’ll need to adjust some of your budgeted numbers in order to work your plan and pay off your debt.Enter this number as your debt payment for your smallest debt, and the “Amount to Allocate” field should recalculate to be “$0.00.”Now you have a balanced budget where your income equals your expenditures! Every dollar has a home!
  2. As you go through the month, track your actual income and spending amounts in the blue column.The spreadsheet will automatically total each category and provide you with the difference between your budgeted amounts and your actual amounts in the “Under/Over Amount” column.This will make it easy to review and determine which categories you were under budget for the month and which categories you went over. Use this information when planning your future monthly budgets.
  3. At the end of the month, the difference between your Actual Total Income and your Actual Total Expenditures should either be put toward your debt snowball or entered as savings so that the “Amount to Allocate” field equals “$0.00.”

[bctt tweet=”Spending plan, cash flow plan, budget. You need to have a plan for your money.”]

Follow this process each month, and you’re sure to see progress toward your goals.

If you’re new to budgeting, don’t expect to do it perfectly right from the start.

My husband and I have been budgeting for almost two years, and as shown in our monthly Debt Freedom Progress Reports, we have never had a perfect budget.

But we stick with it, and we continue to make progress toward our financial goals.

And that’s all that matters.

We know we’re moving in the right direction, and we want that for you too!

Next week, we’ll take a look at some methods for finding more money to put towards reaching your financial goals.

What About You?

Participate in the conversation. Do you have a monthly budget? If not, what has kept you from getting started with budgeting? Share in the comments below.

Filed Under: Budgeting, Get Out of Debt

Comments

  1. Mike Davis says

    February 1, 2021 at 5:07 am

    Using your budget at the right place and earning from it is important which you should think over.

    Reply
  2. Ursula Petula Barzey says

    May 10, 2015 at 7:36 am

    I’ve got a excel document with targets and to track expenses, but can’t say I keep it up dated. Instead, I rely on a really cool program linked to my bank accounts, that allows me to itemize/categorize all purchases and see how exactly my money is spent. It helps to keep me honest.

    Reply
    • Monica Louie says

      May 11, 2015 at 11:38 am

      That’s perfect, Ursula! Use whatever you’ll stick with and gets the job done. 🙂

      Reply
  3. Bonnie Weeks says

    May 6, 2015 at 2:47 pm

    Budgeting and knowing where your money goes is so important. I know there’s times I need to be more diligent with this. Thanks for the reminder!

    Reply
    • Monica Louie says

      May 6, 2015 at 6:35 pm

      I’m glad you liked this post, Bonnie. We definitely get off track every now and then, but we find that keeping on top of our budget helps us feel more in control of our money.

      Reply
  4. Susannah says

    May 6, 2015 at 9:51 am

    We don’t live on a strict budget but we have an idea of how much we can spend for things. Neither my husband nor I are big spenders so we don’t really worry too much about it. The only debt we have is a student loan that we just got refinanced so it’ll be paid off sooner!!! 🙂

    Reply
    • Monica Louie says

      May 6, 2015 at 6:33 pm

      That’s exciting, Susannah! It’s great to have a plan to pay off your debt so that you can work toward reaching your bigger financial goals. 🙂

      Reply
  5. Jenni says

    May 5, 2015 at 8:33 pm

    My husband and I try our best to live on a budget, and it has certainly helped us get out of a few credit cards. Sometimes it just feels so suffocating… especially when the budget has to change due to medical bills or the like and then our planned goal takes even longer to get to. Obviously, getting there each time helps motivate us to do more, but sometimes those milestones are few and far between.

    Reply
    • Monica Louie says

      May 6, 2015 at 6:31 pm

      I hear you, Jenni! Medical bills can certainly be an unwelcome surprise that can throw your budget off track. If you haven’t already, read my post about non-monthly budget busters. I’ll put the link below. Having a plan to get ahead of those (and an emergency fund) will go a long way to help keep you moving forward toward reaching your financial goals. Let me know if I can be of any help. 🙂

      https://www.ourdebtfreefamily.com/the-most-common-budget-busters-that-can-derail-your-financial-plan-and-what-to-do-about-them-plus-a-free-download/

      Reply
  6. Create/Enjoy says

    May 5, 2015 at 7:13 pm

    You are so organized!!

    Reply
    • Monica Louie says

      May 5, 2015 at 8:03 pm

      Thank you!

      Reply
  7. Melissa Kaylene says

    May 5, 2015 at 3:55 pm

    Pinning this for later…I definitely need to get back on track!

    Reply
    • Monica Louie says

      May 5, 2015 at 3:56 pm

      Awesome, Melissa! Let me know if you have any questions about budgeting or just need a cheerleader. 🙂

      Reply
  8. Catherine says

    May 5, 2015 at 2:12 pm

    This is a goal for my family this month. It’s nuts that we don’t have a budget!

    Reply
    • Monica Louie says

      May 5, 2015 at 3:55 pm

      Yay, Catherine! I’m glad you’re getting started with budgeting this month. Let me know if you have any questions or if I can be of any help. 🙂

      Reply
  9. Marlynn [UrbanBlissLife] says

    May 5, 2015 at 8:07 am

    I like how you are open and honest about your own budget and show others that it’s okay to have months where you overspend in one place, and how you make up for it the next month. We’re all human, and life happens, and sometimes I think so many of the budgeting sites out there actually set people up to fail with unrealistic expectations. Keep up the good work!

    Reply
    • Monica Louie says

      May 5, 2015 at 3:54 pm

      Thanks, Marlynn! I definitely put a focus on being realistic when it comes to budgeting, and it’s especially important when one is just getting started. Things never go as we expect they will so we need to add margin to our budget. 🙂

      Reply

Trackbacks

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