Don’t Create a Budget Yet. Part 3 – OK Now Create It.

This is the third post in this series. The first post, Don’t Create a Budget Yet. Part 1 – Find Out Where It Goes., covered how to track what you’re currently spending. We did that so that we have a starting place to create a realistic budget. The second post, Don’t Create a Budget Yet. Part 2 – Figure Out What To Budget., talked about looking at the data so that it will be useful to you. Now we have the data to actually create your budget.


Step 1: Create a new table.

Create a new table. It’ll be similar to the last ones except now put the days along the top, put your new categories along the left side and then create a budget column.

Step 2: Fill in your goals.

Look at the categories that you created and the amounts you actually spent on each category. Develop a goal for each of those categories. Some, like rent, will be easy since they will be the same each month. Some, like eating out, may not be. Write down your budget goal in the new budget column next to the category. Do this for each of the categories that you created.

Step 3: Other categories.

Make sure you list some other categories as well. Specifically put a misc expenses category. Use how much you spent in the previous months to estimate this category. I usually try to estimate a little high for this one.

Step 4: Don’t forget saving.

Add a saving category. Even if all you don’t have any money left add a savings category. If you have a more comfortable income then add an investment category also. But the saving category isn’t negotiable.

Step 5: Adjust the numbers until they work.

Look at how much you make each month. Adjust them to meet your goals. Then adjust the numbers in your budget column until they add up to less than the amount you make in a month. This is where you really make your budget workable. It can be difficult. Try to balance how much you need to spend with how much you can afford to spend. Since you know how much you have been spending this part is easier. Make sure you put a little to savings. It may only be a dollar. That’s fine. But put something there. Once it all adds up you have your budget.

Step 6: Work it and refine.

Now with your budget set up track it just like you have before. The only difference is that as you spend money watch how it compares to your budgeted amount. If you find you’re getting close to the budgeted amount for the month reduce spending. Adjust if you need to for the following months.


Additional tips.

  1. You might find that you constantly are over spending in one item or that you’re constantly spending less. In this case you may need to refine your budget amount. Look at your budget to determine if it is realistic or if you’re just going over budget. Either way, you now have the information to make adjustments.
  2. Pay the important ones first. That dollar you put to savings in your budget, put that in at the beginning of the month so you’re less likely to spend it.
  3. Keep tracking your spending. I usually revise my budget categories and amounts each year. Tracking my spending helps me know how that needs to be adjusted.
  4. Don’t try to make big changes. If you find that one of your categories is completely out of whack make small manageable changes first. They will be easier to maintain. For example, if you find that you are eating out 5 days a week, don’t try to cut it to zero in the first month. Cut back a little at a time until you reach your goal. If you’re able to do better great.
  5. Budgets are rarely static for longer than a year. There is nothing wrong with adjusting as you go as long as you’re making it more accurate and working towards your goals.


What other tips do you have for people creating a budget? Any questions you have about creating your own workable budget?

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