Make a budget

How to Make a Budget

By: K.H. Smith

So if you have reached the point where you are ready to take control of your finances, you are probably wondering where to start.  I personally believe that you have to know where you currently stand before you can plan anything else.  This self-assessment goes along nicely with making a budget so we will do both together.  There are many ways to go about this, but this is how I make a budget.

First, make a list of all of your bills/monthly expenses. I prefer to do this in table form.  You can use Excel, which is handy since it will add everything for you, or you could use Word, or just a paper and pen.


Expenses Minimum Monthly Payment
Mortgage $1500
Car payment $350
Electric bill $50
Gas bill $50
Cable $100
Groceries $400
Student loans $300
Shopping/entertainment $100
Insurance $50
Total $2900



Don’t forget expenses like entertainment, shopping, and dining out.  These are expenses that need to be planned for and included in a budget so they don’t throw off your plan! Look at the last 3 months’ credit card and bank statements for quarterly bills you need to plan for and any other categories you may have missed. Quarterly bills should be divided by three and put in the monthly budget.


The total is your minimum expenses for the month.  Next, you need to add up your income sources.  Depending on how many jobs and incomes you have this can be simple or more elaborate.


Income Sources Monthly income
Paycheck from job 1 $3500
Paycheck from job 2 $400
Total $3900


Now you need to subtract your minimum monthly payments from your monthly income totals to determine how much you have extra.  In this example, it is $1000. Now, look over your expenses again.  Did you include everything, like credit cards, loans, taxes, etc.?  You may add categories over a month as you remember them. If your expenses exceed your income, you need to cut expenses.  Here are some suggestions (link) on areas to cut.


In the above example, the $1000 overage can be used to pay debts and for savings.  If you do not already have an emergency fund, that is a priority. You need a minimum of $1000 saved, preferably 3-6 months of your monthly expenses saved.  Here is a blog on how to save money for that emergency fund. In this example, I would put $500 from two paychecks next month into a savings account.  Once you have that emergency fund, then I would move on to paying off debts. Read about how to snowball your debts here.


Additionally, I revisit my budget on a monthly basis, adjust for changes in spending, and trim expenses that are getting too costly.  I also add categories to save for birthdays, holidays, and vacations.  $15-20 per month can add up to enough money for gifts in my house.  Vacations are optional, so save if you can afford to, or make that a reward once you have paid off debts.


There are apps like, and others that will track your accounts and even spending categories if you want.  This process can be simple or elaborate depending on how detailed you want to be and how may categories you are working with.  If you are just starting out, the old fashioned list works just fine!


You have this budget, what does that mean? Next, let’s figure out how to stay on budget!

(Next post coming soon!)



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