How to Create a Budget

Step 1: List Your Income

Step 2: List Your Expenses

Give and save.

Before you put the things you pay for every month into your budget, set aside money for giving. We believe in putting 10% of your income here and always having a spirit of generosity! 

Also, if you don’t have an emergency fund yet, you need to make saving one of your priorities. We talk about this more in the How to Budget for Your Money Goals section.

Cover the Four Walls.

Next, cover your Four Walls. That’s food, utilities, shelter and transportation. Make a budget category for each of these, and then you can create budget lines underneath each category.

Think of a budget category as a folder and the budget lines as the files inside it. Or the category is like a playlist, and the lines are like the songs.

For example, Food is a budget category, and Groceries is a budget line that goes under it!

Speaking of which—that grocery budget line is super hard to guess at first, so just start with a really good estimate based on your past spending. You’ll learn what you actually need to budget after a few months.

List other essentials and extras.

Next up, list all other monthly expenses. 

• Start with the essentials: We’re talking about insurance, debt, childcare, etc. 
• Then work in a Miscellaneous line and any nonessentials like Personal Spending (or Fun Money) and Entertainment.
• Remember: Needs come before wants. Always.

Okay, that was a lot. To recap, here are those common expenses. We’ve got things in here that might not apply to you, but it should give you a good idea of what your budget categories might look like!

• Giving
• Savings
• Food
• Utilities
• Shelter/Housing
• Transportation
• Insurance
• Debt
• Childcare
• Miscellaneous
• Fun Money
• Entertainment

Step 3: Subtract Expenses From Income

What if you subtract your expenses from your income and you’ve got money left over? 

Don’t leave it there. You’ll end up mindlessly spending it on dollar bin items and one-click wonders. Put those dollars to work by adding any “extra” money toward your current money goal.

What if you end up with a negative number?

You just need to cut expenses until your income minus your expenses equals zero. (Hint: Start with those Eating Out and Entertainment budget lines.) 

You can also get a side hustle or work overtime. Just remember—if you increase your income, don’t increase your spending! The extra cash should cover your budgeted expenses.

Step 4: Track Your Transactions (All Month Long)

 

Step 5: Make a New Budget Before the Month Begins

Here are some examples of month-specific expenses to prep for:

1. Celebrations, like birthdays and anniversaries (never forget those)
2. Holidays, like Christmas and National Donut Day
3. Seasonal purchases, like back-to-school shopping
4. Semiannual expenses, like insurance premiums
5. Annual expenses, like some memberships

Here’s one way to wrangle these changing expenses into your budget:

• Create a budget category called something like Month-Specific Stuff or Alternating Expenses (or Discretionary if you like fancy words).
• Then add whatever lines you need for that month and delete the ones from last month you no longer need.

Where does the money come from? You can cut back spending somewhere else and move that money over to this category or crank up your income for the month. (Time for an extra freelance gig!)

How to Track Transactions

How To Track Your Transactions

Why It’s Important to Track Your Transactions

How to Budget for Your Money Goals

1. Identify your goal

2. Create a plan of attack.

3. Get extra money in your budget to reach your goals.

4. Don’t give up.

Bonus Budget Tips

Budget to zero.

One of our top budget tips is to pick the best method out there: zero-based budgeting.

Zero-based budgeting is how you get intentional with your money. All of it. Any “extra” money left after you list out your expenses doesn’t stay extra. It’s given a purpose and a job—put it into a budget line so it doesn’t get spent accidentally.

Remember, you work hard for your money. It should work hard for you. Every. Single. Dollar. That’s the power of the zero-based budget!

Keep it real.

Have you ever made a goal that was totally setting you up for failure? Like saying you’ll read ten books a month when you barely have any free time? If you want to succeed, you have to push yourself—but you also have to be realistic.

The same is true with your budget. Push yourself to spend better and save more—but be realistic with your life as well. When you keep it real, you can really win.

Think weekly.

You may want to break some of your budget lines into weekly portions to help you spread out your spending. This is super helpful if you get paid more than once a month—but it’s a great trick for any budgeter.

For example, if you give yourself $200 for Personal Spending, think of it as $50 a week. If you plan for $600 on groceries, that’s like spending about $150 a week.

Sometimes thinking in these bite-sized amounts makes it easier to stick to your budget.

Have a Miscellaneous line.

We mentioned this before, but you need a little space for anything that pops up or you forget (like school photos or your anniversary—wait, don’t forget that!). A Miscellaneous budget line helps you cover these expenses without busting your budget or running to the credit card. Speaking of which . . .

Ditch the credit cards.

We’ve got about a million reasons (at least) to stop using your credit cards, but here are just two.

First: If you’re using credit cards to cash flow your spending—using them to pay for normal monthly expenses and making a bulk payment at the end of the month—that’s a bad money management system. 

Paying that lump sum means you don’t see just how often you buy breakfast biscuits on the way to work. What if you’re literally eating away at what could be a healthy retirement fund? When you track every expense, your expenses can’t hide from you.

Second: If you’re getting behind on payments, you’re racking up interest. (Research done by Ramsey Solutions shows 4 out of 10 credit card holders fall in this category, by the way.) And you’re getting stuck in the cycle of paying off last month’s expenses this month.

You can never get ahead that way. Budget this month’s money to pay for this month’s expenses—and to save for the future! That’s how you stay in control of your own money.

Keep moving forward.

The decisions you made yesterday don’t have to determine today. When you make mistakes with your money (and you will—everyone does) don’t throw a pity party. Keep. Moving. Forward.

Learn to say no (or not now).

Don’t worry about what everyone on social media appears to have. Some of them are lying. Some are in debt up to their designer sunglasses. And a few really do have their lives together.

But those people worked hard for it—and that’s what you’ll do too.

Work hard defending your budget—saying no or not now when you need to—because being true to yourself, your budget and your money goals is more valuable than anything you could ever buy.

Give yourself lots of grace.

It usually takes three months to get a handle on this whole budgeting thing. It won’t be perfect the first time or the second time. But you’ll get there! Give yourself grace as you go.

Budgeting isn’t a sprint. It’s a marathon, a commitment, a lifestyle! Keep all these tips for staying motivated in your back pocket—pull them out whenever things get hard.

And when it does get tough, remember: You. Are. Tougher.

The Importance of Accountability

Budget Meetings

Get with your accountability partner every month to check in and set up the next budget. If you’re married, do this together and in person at a monthly budget meeting. If you’re working with a friend or family member, you’re welcome to make your budget alone, but never skip the check-in.

If you aren’t sure what to actually do in these meetings, grab yourself a copy of our budget meeting guides—we’ve got a classic and couples edition.

Listen—there’s no shame in asking someone to help you keep your eye on the goal. Just the opposite. There’s incredible strength in seeking accountability. So, get with your accountability partner and start planning those budget meetings. Today!

How to Pick a Great Accountability Partner

Got a spouse? Boom. You’ve got a built-in accountability partner. Which brings its own challenges (and we’ll get to that in a second).

But if you need to hand-pick your accountability partner—or as a couple you want to find another couple to check in with—this list of characteristics will help you find a top-notch one.

• Encouraging: You need someone who will cheer you on—who believes you can reach your goals.
• Empowering: Look for a person who will pump you up to get moving on your goals and stick with your budget. Avoid someone who enables you. In any way. At all.
• Honest: Get an accountability partner who’s truthful and bold enough to call you out.
• Judgment-free: Honest, yes. Judgmental, no. This person should care about you, not look down on you.
• Vulnerable: This accountability partner stuff isn’t one-sided. You should both be leaning in on each other and walking through your money journeys together.
• Trustworthy: This could seem like a no-brainer, but you don’t want to talk about money with someone you don’t trust!
• Present: You need someone who is available to connect with—and who will be fully present when you’re together.

How to Get on the Same Page With Your Spouse

Look back over all those characteristics we just mentioned. Yeah, if you're married you’ve got a built-in accountability partner, but that doesn’t mean you can skip being a high-quality accountability partner.

Be encouraging, empowering, honest, judgment-free, vulnerable, trustworthy and present with your spouse! Always—but especially when you’re talking about money.

And what if you feel like you’re miles away from being able to have successful budget meetings with your spouse, because you’re not even on the same page about money? Have a conversation together and follow these four guidelines (from our budgeting BFF and money expert Rachel Cruze).

1. Be honest.

When you’re talking about money, dreams and building your life together, it’s important to be vulnerable and honest with your partner. These types of conversations are the ones that build or strengthen the foundation of your relationship and ultimately your life together.

Be honest about what you believe and how you feel, then allow your spouse to do the same.

2. Listen.

Really listen to your spouse. Don’t just listen to think up a response of your own.

Here’s an idea: When your spouse is talking, you can only ask questions. This will help you get to know the why behind how they actually feel. Then, when they’re finished, you can share your thoughts about what they said.

3. Stay calm.

When you raise your voice, your spouse will likely raise theirs to match. Then you’re both just talking loudly (or yelling) just to be heard. If you’re listening intently and asking questions, there will be no need for yelling. So, stay calm no matter what.

4. Show grace.

Being too hard on yourself or your spouse won’t help. Find a way to bring grace and truth together—and live in the center of the two. There will be hard truths that you’ll both have to sort through, but learning how to respond to each one with grace will go a long way.

If you want even more help with this, take Financial Peace University together. This nine-week class is perfect for any couple—whether you’ve been married five minutes or 50 years. You’ll learn how to start healthy conversations about money, set goals together, and start budgeting as a team.

How to Stay Motivated

Surround yourself with people who respect your budget.

If you hang out with senseless spenders, you can be tempted to do the same. Find some friends who won’t pressure you to do stuff outside of your budget.

Make budgeting easy with an app.

Okay, not just any app. Our app—EveryDollar. Because you can try to keep up with pencil and paper or spreadsheets, but they aren’t as easy. And let’s face it, an easier budget is one you’re way more likely to stick to.

Define your why.

Dig deep and be honest about the reasons you want to take control of your money once and for all. That’s your why. And when things get tough or boring, remember your why!

Make your goals visual.

Hang up images around the house of visuals that represent your goals. Paying off that car? Put a picture of it on your fridge to remember why you’re cooking at home instead of ordering that delivery pizza.

Budget for fun.

Lower the risk of budgeting burnout by budgeting for fun. Now, if you’re saving for an emergency fund or paying off debt, that fun money will be small. But it’s just for a season! You got this.

Celebrate wins (big and small).

When you reach a goal—even a small one—celebrate! After you budget three months straight, pay off a debt, or cut extra spending for 30 days, treat yourself to a free or budget-friendly reward.

Find better ways to deal with stress than spending.

If you respond to stress by impulse buying things, replace that habit with a better one. A nice relaxing bath, a walk or run outside, a card game with the fam, a cup of chamomile tea—these are all great (and inexpensive) ideas.

Prepare for burnout.

Hey, burnout happens to us all. Go ahead and decide now what you’ll do when it comes. Just don’t give up on budgeting. It’s how you’ll make your money goals happen—and that’s worth fighting for!