How to Create a Budget That Works For You

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I cannot stress enough the importance of having a monthly budget. If you are looking to gain your financial freedom, or are just simply tired of living paycheck to paycheck then you need to have a budget! Let’s start by asking what is a budget? If you search for the definition of a budget, you will find this definition:


“An estimate of income and expenditure for a set period of time”


Simply put, how much money you have coming in your pocket each month, and how much money you have going out of your pocket each month. To help you with creating your budget, I have created a list of several steps that should help you along the way. Read along all the way to the end to learn how you can get a free budget template sent to you!


Step 1: List All Income Sources

So your first step when creating your own budget is to first calculate all income that we have coming in each month. Personally, our paychecks are on a set schedule through the year so I start by creating a chart for the entire year based on when we get paid and how much we expect each paycheck. I then enter the total income at the top of my spreadsheet for each month.


Here is an example of what our income list looks like when first creating our budget:



2nd: $XXXX.XX

15th: $XXXX.XX

17th: $XXXX.XX

30th:$ XXXX.XX


4th: $XXXX.XX

15th: $XXXX.XX

19th: $XXXX.XX

31st: $XXXX.XX

Total: $XXX.XX


Personally, I don’t list income from my side hustles such as mystery shopping, affiliates, or my businesses. I only include income from our jobs. You may choose to do this, but since the income from our jobs cover our expenses I am putting all money received from extra income sources towards creating a travel fund, saving for a house, and paying down our debt. You can decide what works best for you though.


Step 2: List All Expenses

The next thing you will want to do is create a list of all your monthly expenses. This needs to include investing, savings, bills, loan payments, necessities, and any extras you may be paying for. You need to list these according to when they are due and I recommend including the due date beside them to make your life easier. I also recommend keeping the amount you are putting towards investing and savings at the top of your list because it is of utmost importance that you pay yourself first. It’s okay if you need to work up to being able to do this, but make this switch as soon as possible if you haven’t already.


Here is an example of what our expenses list looks like when creating our budget:


Date Item Amount
1st Savings $XXX.XX
1st Investing $XXX.XX
4th Rent $XXX.XX
15th Car Loan $XXX.XX
20th Life Insurance $XXX.XX


Step 3: Define Your Bare Bones Budget

This step involves separating the extras from the needs. This is so that if something comes up that will directly affect your monthly budget, such as losing a source of income, you will know what you can cut out of your budget first to make ends meet, but have still budgeted money for personal expenses. Personally, we define our needs in the following tiers:

  1. Saving/Investing
  2. Bills
  3. Loans
  4. Food, Gas, Laundry, and supplies for our cat
  5. Extras such as clothing, dining, and fun

By doing this we have another chart that looks like this (I personally separate my tiers by a row of grey but you can do this however you wish):


Date Item Amount
1st Savings $XXX.XX
1st Investing $XXX.XX
4th Rent $XXX.XX
13th Utilities $XXX.XX
20th Life Insurance $XXX.XX
15th Car Loan $XXX.XX
21st Student Loan $XXX.XX
Groceries $XXX.XX
Pet Supplies $XXX.XX
3rd Netflix $XXX.XX
Clothing $XXX.XX


I only use this chart when looking at what I can cut out of my budget. Obviously, the items on the “Extras” tier would be first to go, and then I would just move up my tiered ladder. To prevent such a thing from happening though, I would recommend having an emergency fund saved up, but I will discuss this later on. If you don’t have an emergency fund and need to cut in the loan or bills tier, just be sure to call anyone you can’t pay right away. Ask for an extension, or let them know when you will be able to make a payment. Many times these companies are pretty lenient if you have a good history with them and can be very understanding for a brief period of time.


Step 4: Subtract Expenses from Income and Find Remainder

Now that you have identified your monthly income and expenses, you can now work with your expense chart which should look similar to this:

Date Item Amount
1st Savings $XXX.XX
1st Investing $XXX.XX
4th Rent $XXX.XX
15th Car Loan $XXX.XX
20th Life Insurance $XXX.XX


In this step, you are going to subtract your total expense cost from your total income to find your remaining amount. This is how much you will have leftover if you stick to your budget.

At this step, you will see that you have one of three things:

  1. Balanced Budget-income and expenses are equal bringing your total to $0.00
  2. Budget Surplus- money leftover at all expenses and obligations have been paid (ex: $50.00)
  3. Budget Deficit-not enough money to cover your expenses (ex: -$50.00)


If you have a balanced budget, I would recommend cutting something from your extras tier until you either have an emergency fund set up or you are making more money to where you have a budget surplus. That way you have a safety cushion in case of emergencies. If you prefer to balance your budget out to zero, that’s fine just make sure you are putting money into your emergency fund as well.


Step 5: Setting Your Cash Flow

This step is not necessary but I do find it extremely helpful and it is what we do to get my cash flow to a place that is comfortable for us. Remember step 1 where you listed your income for each month? This step is where doing so comes into play. You will want to create a chart that separates each expense with the paycheck it will be coming out of. Here is what my chart looks like during this step:



Income: $XXX.XX             Expenses: $XXX.XX       Surplus: $XXX.XX

1st: $XXX.XX

Due Date What Amount Paid
1st Rent $XXX.XX
3rd Utilities $XXX.XX


15th: $XXX.XX

Due Date What Amount Paid
16th Rent $XXX.XX
18th Utilities $XXX.XX
Groceries $XXX.XX


This helps me determine when each item needs to get paid so that I have money in my account at all times in case something unexpected occurs, like an automatic withdrawal I wasn’t expecting. If I didn’t do this, then I may hit a balanced budget of $0.00 during one paycheck and a budget surplus of $50.00 the next paycheck. Instead I prefer to have a budget surplus both weeks of $25.00. (This is just an example, but hopefully it helps give you an idea of what I mean)


Step 6: Finalizing Your Budget Document


Now that you have created your budget, you will want to decide how to keep track of your budget. Many people use an Excel Spreadsheet. But, you could also just use a word document like I currently do, or you could hand write your budget and use a calculator to calculate everything that way. It’s really up to you because it is your budget!


So that is how you create your budget! I plan on expanding on some of the items I mentioned in this post such as an emergency fund, and what to do with your budget surplus, or what to do if you have a budget deficit.  Hopefully, this has helped you learn the basics of creating your own budget before you even create a document to keep track of your finances!



If you liked this post, don’t forget to subscribe to be updated when I make new posts and so you can be sure to get your own FREE budgeting template (word document)!

Also please share, like, and follow on other social media platforms! I love to follow along in your journeys as well!


Here are some additional resources you may find handy when creating a budget:


What is a Budget Plan: The Extra Income Project


Everyone Needs to Have a Budget: From Pennies to Pounds


The Complete Budgeting Guide: How to Create a Budget That Works: Making Sense of Cents


How to Create a Budget Spreadsheet:


Personal Finance Glossary:


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    • Thank you Allan. I am trying to be sure to lay out each step in a very detailed way! I appreciate your feedback!

  1. Hi Amanda
    First off your site is looking amazing! I love all your images, great work!
    Secondly, what an awesome post, very detailed but very easy to read. Thank you also for including a link back to my site. If I may be cheeky, people can get a copy of the budget plan I use on Google Docs in my link (I managed to get my automation fixed up so it’s definitely sending out). I hope people find it helpful.
    Keep up wth the awesome progress, I’m thrilled your site is coming along so fast!
    Lloyd Phillips recently posted…Why a Cost-Cutting Strategy Helps You Pay Off Debt QuicklyMy Profile

    • Thanks Lloyd! I have been putting as much work as I am able into my blog as I feel I am playing catch up lol. Thank you for the encouragement and I hope to continue making improvements! Definitely feel free to share your budget plan, I am offering a simple budgeting template I use as well for anyone who subscribes 🙂

  2. Yep! When I did it I just did a URL link to the page. But yours did a ‘ping back’ where it shows at the bottom of my blog post that you did that (have a look :-)). Someone else did a ping back on another of my posts, and then someone else referenced a post of mine and it wasn’t a ping back. So I’m wondering what’s done differently for the ping back? Calling it that because that’s how it appears! Thanks 🙂
    Francesca – From Pennies to Pounds recently posted…Father’s Day Gift Ideas That Won’t Break The BankMy Profile

    • I’m honestly not sure. But I think it could be because of the commentluv plugin? Let me know if you find out otherwise!

    • I didn’t finish my thought lol. All I did was include a link, but I did make it a hyperlink I think it’s called so maybe that’s the reason?

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