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How to Make a Budget

June 5, 2009

Few things can make people’s skin crawl like the idea of creating a budget. If you are unsure where your money goes each month or wonder why you never seem to get ahead, a budget might be a good tool for you. The word itself conjurs up feelings of kissing your freedom and your fun goodbye, and some people even try to mask the feelings by calling it a spending plan.

Ironically, many people find budgeting a highly liberating experience. A budget, sorry – spending plan, can be a great tool to help control your money instead of your money controlling you. What many find after creating and sticking to it is that they have more money to spend on discretionary items and can have fun without the guilty feelings. I’d like to provide some simple and practical ideas on how to create a budget and tips on sticking to it.

Where Are You Now?

The best place to start in creating a spending plan is to find out where you are. When you Mapquest directions you always need a starting address. It’s the same idea with financial planning. Getting an idea of where you are is an eye-opening experience for many people. To me, the best way to figure out where you are is to do a 30-day diary of expenses. It takes a little more time up front, but I feel it reaps big rewards.

Write down every single dollar you spend in a month whether it’s coffee at the gas station or lunch at a local restaurant. After 30 days of doing this you will get a pretty good idea of what unnecessary expenses you might be able to cut out.

Next, list out the categories of each expense (i.e. gas, food, clothing etc.), jot down the amount in each category and determine if those numbers are realistic. For example, you may find that you spent $75 that month on lunches, but by making your own lunch once or twice a week you feel you can get that down to $50. Use that number for your plan and do this for each category.

Where Are You Going?

The next step is to figure out where you want to go financially. What I mean is consider what goals you want to plan for. You may have a goal to give more of your money to charity or to save for your child’s education or your own retirement. List out each goal so that you know what you’d like your money to do for you. This doesn’t mean you will be able to save for each goal, but listing them on paper is a powerful and motivating tool.

It’s important to remember that these items must come out first, otherwise you and I both know that if you wait to see how much is left over and then try to give or save it probably won’t happen.

How Do You Get There

Once you’ve determined where you are and where you want to go the next step is to put some numbers down. Write down all of your expenses and the alloted amounts or targeted numbers for discretionary items like going out to eat. One of the reasons budgeting becomes such drudgery for many people is that they don’t plan for fun things. Bob at has a good post about how budgeting should be like making cookies.

Michelle Jones, editor of, has personally reviewed and recommends several budgeting tools to help get you started. She says these budget tools “can be extremely useful and will help you stay on track year after year, but the most important thing is that you find something that works well for you and your family.”

Once you’ve outlined your alloted expenditures, factoring in your savings and giving the hard part is sticking to the plan. Review it often and make adjustments as necessary. Remember, the budget is meant as a tool for you to control your money so don’t let the budget control you. Be flexible when needed, factor in the fun things and persevere.

Staying On Track

Here are some general tips to staying on track:

  • Make it a family affair.  When everyone is working together toward the same goal you are more likely to stay on track. 
  • Check your progress regularly.  Ideally once a month you should sit down and review how you did and make any adjustments as necessary.  You may have budgeted $100 monthly for gas, but you find after a few months it isn’t realistic.  It’s OK.  Make your adjustments and determine where you might be able to cut back. 
  • Make it a lifestyle.  You’ve heard people talk about this with food: “it’s not a diet it’s a lifestyle”.  The same can be said for budgeting.  Make it part of your life and with some discipline you will reap rewards. 
  • Start at the right time.  Don’t start when you know it will be difficult (e.g, right before the holidays or before a major vacation that was already planned)
  • Find a budgeting system that fits your needs (e.g., budgeting software)
  • Build rewards into your budget (e.g., eat out every other week)
  • Try to avoid using credit cards to pay for everyday expenses.  Using credit cards makes it more difficult to track your expenses.  After you get the hang of your budget and have been sticking to it, you may feel comfortable enough to start using them again, but remember to pay off your balances in full each month.  
11 Comments leave one →
  1. June 5, 2009 8:49 am

    Things that made it easier for me:

    Microsoft Money – Seems pretty easy to use and good reporting for personal finance

    Chase Bank – Great online tools – Probably the best that i have seen

    Im not saying switching banks but the combination of Microsoft Money and Chase bank was SO EASY for tracking expenses. Im terrible on keeping receipts…but Microsoft money connects to your Chase account seamlessly. Downloading transactions in real time with one click of the mouse (not just importing a statement) Then you just categorize the transaction that came in…saves a lot of time.

    Just some advice from a techy guy.

    But there is nothing like the feeling of when you run your report for the month of expenses and your tithe shows up in your top 3 expenses…The Lord gives you an overall peace about your finances that you will never get by yourself. Money is a huge stress in peoples lives, but you will be amazed about how everything just fall into place when you have stewardship in your budget and you follow it.

    • June 5, 2009 9:13 am

      Thanks for the tip about those two items synching to make things easier and also thanks for the great testimony of budgeting in your stewardship!


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