How to make a budget & manage your money

Learning how to make a personal budget doesn’t have to be complicated.

Creating one can be easy.

If you haven’t done it before, it can certainly be overwhelming though. There’s no question about that.

Some people over-simplify it.

Some say “plan,” “write down expenses,” “set goals.” They give a few sentences of explanation.

Is that enough to help?

If you only need a few guiding points, that’s fantastic. The more comfortable you feel creating a budget on your own and optimizing how you spend your money, the better shape you’re in.

But if you’re not comfortable and need more guidance, that’s OK too!

Only 30% of Americans had a detailed monthly budget in 2013, according to a study done by Gallup. Which is a surprisingly low amount, considering everyone has to adhere to a budget.

Here’s the deal:

Your budget and your situation are unique and sometimes a more detailed explanation to the budgeting process is needed.

I was fortunate enough to have people around me who taught me what I needed.

Because of that, when I graduated college and had my first full-time job post-grad, I understood what type of apartment I could afford, how much money I could spend on food and more.

It was incredibly helpful.

My budget was simple (I didn’t have a ton of expenses) but it was effective. I always understood what I could afford, whether or not a purchase made sense, if I could take on any other debt like a car payment, etc.

It became second nature eventually.

Even if you haven’t created a budget before, after you go through your financial plan a few times, it will be second nature to you too.


But to get to that point, let’s tackle the process of creating a monthly budget.

First, grab a sheet of paper or open up an Excel document. Now:

Understand your current financial situation

How much money do you have right now?

Is it cash in your wallet? Money in your checking account? Funds in your savings account?

What about any retirement accounts? A 401k, IRA, 529 College Savings?

Do you have any debt? This could be credit card, mortgage, student loans, car payments etc.

All of this is going to determine your net worth. It will also help you figure out what your financial goals might need to be. Is it creating an emergency fund? Paying down debt?

Like I said above, it depends on your financial situation.

In this step of the process, we’re not taking into account monthly bills yet or your income, we’re only looking at what you have at this very moment.

So here’s what you should currently have down:

  • Assets
    • Cash
    • Checking
    • Savings
    • 401k
    • IRA
    • 529 College Savings Account
    • Individual brokerage accounts
  • Liabilities (Debts) – Include the total amount owed, not what you have to pay on a monthly basis
    • Home mortgage
    • Car loan
    • Student loan
    • Personal loan
    • Credit card debt
  • Any other accounts you may have

Do you have all of your numbers?

I would recommend you calculate your net worth right now since you have all of the numbers, but if you would rather wait until after the budget process go for it and skip down to noting your monthly income.

Taking the net worth step?

Here you go, it’s easy.

On your paper or Excel sheet, add up all of your assets. Is it what you thought? Less? More?

Now add up all of your debts.

Assets minus debts.

Where are you at?

To give you an idea, as of October 2015, my net worth is around -$233,000.


That includes a mortgage, student loans and a car loan. And honestly, that’s not uncommon if you’re younger.

If you haven’t had much time to build up your savings and investments then that is going to be your situation as you take on debt in order to make certain purchases. But when you have that negative net worth, your long-term plan needs to address that.

There are lots of ways to address a negative net worth such as paying down student loan debt, making your monthly mortgage payment, saving money, etc.

It all helps, but each situation is unique. For some people, the best way to address that net worth is to invest and for others, it would be to pay off student loan debt. It all depends.

But you know what, the most important part is to plan to work on your net worth regardless of where you are at.

But I digress. We will cover that in another post.

So let’s move forward with creating your budget.

What does your monthly income look like?

Now that you know what your current financial situation is, how much are you making each month?

If you are in a salaried position, this is going to be a lot easier.

If you are hourly and your hours vary, then you will need to do a bit of estimating. There are a few ways to do this.

  1. Take your average paycheck amount for as long as your pay has remained consistent and as long as your hours have remained fairly similar to what you are doing now.For example, if you are working 30 hours per week now but 4 months ago were working 40, then take your average paycheck for the last 4 months while working 30 hours per week.With this way, there will be months where your budget is lower or higher and that is a downside to this method.
  2. Take the lowest (within reason) paycheck you have received at your current pay and similar hours and use that as your income.While you aren’t taking into account all of your income here, you also aren’t running the risk of budgeting for more than you are actually bringing in.There will simply be a surplus most paychecks which you can use to cover unexpected expenses or pay yourself (Ex. emergency fund, retirement savings) if you don’t need it immediately.
  3. You can also combine methods, using one of the above to create an overall and estimated monthly budget, and then create a rolling 4 week budget every time you submit your time at work.When I got payed twice monthly, this was the method I used and it was probably the most accurate, at least for me. Sure things were sometimes off, but it gave me an idea twice a month where I was at financially.

Do you have your monthly income number now? Alright. Write/type that down.

Now calculate your monthly expenses

When you’re creating an overall monthly budget, you want to include things that definitely come up every month here. These are things like your mortgage or rent payment, utilities (water, electric, gas), cable, internet, etc.

How about groceries, gas, insurance payments?

Yeah, those too.

Things you shouldn’t include yet?

Expenses that are random, don’t come up often (Ex. back to school expenses), things of that nature.

These are items that you can pay for down the road by either taking extra from your monthly budget or tapping into a savings fund that has been set aside specifically for these types of expenses.

A few tips to make sure you have everything:

  1. Log onto your bank’s website and look at a full month worth of transactions. Find every recurring bill that came out and notate that on your paper or Excel sheet.My actual budget setup can be seen below. This is the pretty version.
  2. My personal favorite, which if you’re a visual person this may be a good option, is to buy an inexpensive calendar whiteboard to visualize when bills are coming throughout the month.You can do this in conjunction with the above tip or you can do it by itself. I find this particularly helpful when I have twice-monthly paychecks so I can see what bills come before each paycheck.You can see my actual budget for a month below, exactly as I write it on on my whiteboard.It doesn’t have to be fancy. It doesn’t have to be perfect. In fact, it looks kind of ugly.But as long as you can make sense of what’s happening on it, you’re good to go.But it details everything that is going on in the month so I understand where my money can go. And this is how I’ve been creating my budget for the last few years. This does not track my actual expenses though.


So what should you have at this point? Here are some examples.

  • Mortgage/Rent
  • Electric
  • Water
  • Gas
  • Internet
  • Cable
  • Phone
  • Car Insurance
  • Homeowners Insurance
  • Pet Insurance
  • Life Insurance
  • Debt (Student loans, credit card, other)
  • Car Payment
  • Gym membership
  • Subscriptions (Ex. magazine, news site)
  • Groceries
  • Gas
  • Recurring medical expenses (Ex. monthly prescriptions)

There could obviously be others, but the point is to make sure you create an exhaustive list of things that are either bills or required (when I say required, I am talking about things like food to survive, gas for transportation, or prescriptions to manage anything medical).

Gas and food will take the most estimation here since they are obviously variable. But the best way to get an accurate estimate right now is to look at how much you have spent on food the last few months and take an average.

If you have been spending more than you should on food, take that average and reduce it based on what you think is appropriate. In the end, just because you’re budgeting, let’s say, $250 per month on food doesn’t mean you can’t only spend $200.

You have all of your expenses written or typed down now?

Add them up.

Now is also a great time to understand how much you should have in an emergency fund. Depending on how variable your situation is (Ex. old home? old car? existing medical issues? hard to find a job in your industry?) you will want between 3 to 6 months worth of expenses in your emergency fund.

Note that you’re only taking into account your expenses here, not your income.

Don’t shortchange yourself here to simply hit your emergency fund goal faster. If you underestimate, you may leave yourself out in the cold later if you actually need it.

I digress though, let’s check what you have left.

How much money do you have left?

Well, take your monthly income and subtract your monthly expenses.

How much do you have left?

Do you actually have money left?

Enough to put any in a savings account?

Enough to cover variable expenses each month?

Some recommend putting 10% of your income into savings each month. Is that doable?

There are a lot of questions to ask at this point because if you haven’t done this before you could be looking at a reality check.

Hopefully that reality check is actually a good thing, showing that you have some money left over.

Either way, we can figure out ways to hack your budget from here in order to have more money left over each month.

Hack Your Budget to Optimize Your Expenses

So one of the things about the expenses you have (and your income too, but for now we’re just going to focus on what’s being spent) is that there are different things you can do to reduce them.

Some may not seem obvious, but many times there are a lot of adjustments that can be made.

Let’s start with a few of the basic things you can do in each category, and then if you’re interested in more in-depth hacks, you can click-through to other posts as they are written.

Water Bill

Utilities are one of the areas that are fickle, because some months you can do great and others may be rough. Water is no exception.

But there are a few tips and tricks you can easily check right now to see if you can save more money each month.

  1. Do you have landscaping? Plants or a lawn? Check to see how often you are watering them with your irrigation system for this time of year and compare it to what’s recommended. Some good information can be found at Scotts and Popular Mechanics. Reduce the time you are watering your plants if it’s too much. If you’re afraid you’re going to cut back too much, gradually reduce and see how your plants do.
  2. If it rains and you have an irrigation system, delay watering for a few days and count the rain as a watering session.
  3. Check for leaks. Leaks are one of the biggest water wasters around, with the EPA estimating that an average household’s leaks can account for 10,000 gallons of wasted water per year (270 loads of laundry). These leaks can come from any of your sinks, a toilet (put a few drops of food coloring in your toilet tank and wait 15 minutes. If it shows up in the bowl, you have a leak), shower heads or more.
  4. Shorten your showers and/or replace your shower heads. Most shower heads will use about 2.5 gallons of water per minute, but very efficient ones will use even lower. Shortening your shower is a great, free way to reduce your bill and replacing your head with something Water Sense certified may be even better.



In the grand scheme of things, leaving a light on when you’re not in the room isn’t going to make a huge difference in your energy bill. It’s generally wasteful and every little bit helps, so I’m not saying don’t turn it off, but there are other areas to make a bigger dent.

  1. Depending on where you live, space heating or AC accounts for almost half of all energy usage in the home ( Adjusting your thermostat by a few degrees here or there and being aware of what you’re setting the temperature at when you’re not home, can both make a huge difference. If you are able to adjust your thermostat for around 8 hours per day, you can save about 1% per year off your energy bill for every degree you adjust your temperature. Easy money.”
  2. Check the temperature setting on your water heater. Do you feel comfortable turning it down to save a little money?
  3. Make sure your home is as sealed as possible to make sure your home’s heat or cool air isn’t leaking out. Be aware of any doors or windows to make sure they aren’t left opened at inopportune times.


Cable is one of those interesting cases for saving money because of the recent trend of cord-cutting. There are a lot of options out there, which are detailed in the link above.

If you aren’t looking to cut the cord just yet, you could always consider bundling your interest and cable if you haven’t done so already, or also calling up your cable provider and asking about any promotions.

A lot of people talk about threatening to cancel in order to get a discount, but if you do that make sure that you have information to back your decision up.

In other words, it’s a lot more convincing to say that you’re thinking of quitting because you can get “X” service for $X cheaper per month than just saying your current service seems to expensive.

Research your options so you have a foundation for asking for any rate cuts.


First off, if you have a home phone, do you really still need that? Could be an easy monthly expense to cut if you still do.

Other than that, your mobile plan is another area that is pretty easy to save money if you’re flexible.

The first thing to look at is how much data you use. If you average only, let’s say 3GB per month, do you really need a 5GB plan?

The other option is to look at another provider.

With all of the deals that T-Mobile essentially started a while back, most carriers will pay all of your fees to switch away from a network. Do some research on what you would be able to get on different networks, assess their reliability and speed in your area and see if it’s worth switching. Some great sites to test and see how good mobile coverage is in your area can be found at:


You have your well known providers like Verizon, AT&T, Sprint & T-Mobile, but did you also know other carriers like Republic Wireless, Straight Talk & Cricket? Many of them actually use big networks like Spring or Verizon but offer it at a cheaper cost. Now it does typically come with some restrictions (Ex. No 4G) but if you’re not a huge data user or have access to Wi-Fi a lot, it might be something to look in to.


There are a lot of ways to save on groceries which can be a post of it’s own, but a few simple ways you can save now:

  1. Make a list and stick to it. Don’t reach for extra items that are on sale or packages of food that look good. Make a list with all of your meals on it to figure out what you need and only buy from that. You’re less likely to spend extra money on food you don’t necessarily need this way.
  2. Take a look at the grocery store ads or manufacturer’s coupons you get in the mail or in the Sunday paper and plan a list according to what’s on sale.
  3. Eat a meal or snack before heading to the store. This isn’t incredibly conventional, but in my experience I’ve found the hungrier I am at the store the more likely I am to splurge. Eat beforehand to avoid buying things you are simply craving only because you’re hungry.

Student Loan Debt

There are two methods to address how much you pay on your student loan debt. One is more of a long-term fix and the other is shorter term.

  1. Enroll in an auto-pay plan. Many company’s will give you a discount on your interest rate if you enroll in auto-pay (For example, we get a .25 percentage point decrease in our interest rate). While this doesn’t immediately help your monthly payment, you will end up shortening how long you are making the payment.
  2. Look at your repayment plan options. The best source of information would be the U.S. Department of Education if you have federal loans or your loan provider. In general, the different repayment options are:
    1. Standard repayment plan – Applicable for Direct loans, Stafford loans, and PLUS loans, this requires you to make a payment of at least $50 per month with the amount being what will be required to pay off your loan in 10 years.
    2. Graduated repayment plan – For the same types of loans, this keeps your monthly payments low at first but gradually increases them over time, over the course of 10 years. Because of interest, you will pay more in the long run than a standard plan.
    3. Extended repayment plan – For the same types of loans, but only if you have more than $30,000 worth, your payment is calculated so you will pay off your loan in 25 years. Much more expensive than the two previous options, but this also reduces your monthly payment. For example, this is the current repayment plan I am currently on but I pay more on the loans each month. This way, if something comes up I have a bit more flexibility in my monthly budget because of the lower required repayment plan. But by paying more on the months that I can manage, I’m still on track to pay off my loans in 10 years (or less).
    4. Income based repayment plans – I’ll quote the DoE here…“Your maximum monthly payments will be 15 percent of discretionary income, the difference between your adjusted gross income and 150 percent of the poverty guideline for your family size and state of residence (other conditions apply).” To do this though, you must prove a financial hardship, but if you are in this situation and make your payments on time, after 25 years the remainder of the loan will be forgiven. This option again requires you to pay a lot more than standard repayment plans.

Save, save and save

One of the biggest reasons to plan out everything is to hopefully figure out how much you have left over in order to save.

Pay yourself.

For long-term financial flexibility, paying yourself is the most important thing you can do.

Paying yourself could be contributing money to an employee sponsored 401k, putting money in a savings account, or contributing to a Roth IRA.

Whatever account you put it in, the idea is that you are setting yourself up for financial flexibility by putting money away for you to use in the future for emergencies, longer-term financial goals or retirement.

After you have optimized your budget, track your expenses and reassess your budget regularly

Regularly could mean a lot of things, but I would recommend you reassess your planned expenses on the same schedule you receive income.

Or, especially if you haven’t budgeted before, a weekly check-in could be very beneficial to make sure you’re on track with what you’re spending.

These planned expenses are things you know you’re going to have to spend money on, like home repairs, plans or something else.

A weekly or monthly re-assessment may sound like a lot, but it’s the easiest way to account for un-planned expenses.

Regardless of when you get paid, a weekly check-in on how much your spending is also a good idea.

This means seeing how much you have spent on food, for example, and whether or not it matches up with what you are budgeting.

The biggest thing with your regular check-in is to track your progress, see how you are doing compared to your budget, and adjust your overall financial goals depending on your situation (hopefully it’s because you met those goals!)

The biggest benefit you will see from this is being able to determine the exact amounts you will either be over your monthly budget or under your monthly income where you will be able to have flexibility.

The latter is the goal of course.

What budget apps will help keep you on track?

Budgeting apps are a great way to use technology to automatically categorize expenses.

Often, people don’t stick with budgets or update them because it requires regular attention.

Budgeting apps won’t replace regular check-ins, but they will allow you to get a quick idea about where you are over or under spending in specific categories.

What are some of the best apps out there? is perhaps one of the most popular budgeting apps out there. They have a website as well as a mobile app that you can utilize.

I’ve used this app most extensively, and I have mixed feelings about it. It’s certainly comprehensive, but I often found myself having to spend a lot of time re-categorizing expenses that were mislabeled.

It also has a hard time connecting to my USAA account because of the variable security questions that the site has. I haven’t been able to update my accounts through USAA in months.

Bank of America, where I have my other accounts, has very seamless integration though.

You have the ability to add almost any account you want here, whether that’s an IRA, 401k, credit cards, etc. and it also gives you easy access to your net worth based on what you have synced to Mint.

They will also provide you with alerts based on how you’re spending compared to your budget.

I would suggest trying out Mint despite some its limitations because depending on what accounts you need to sync or how many categories you use in your budget, it could certainly work for you.

See how it works for you for a week or so and if it is easy for you, that’s fantastic. If not, you can easily delete your account and any synced profiles you have.

Good Budget

Good Budget plays on an older method of using envelopes to divide cash in order to create spending categories.

It’s a simpler app for people who are looking for to create a basic budget for themselves.

From what I’ve read, they’re “irregular” option is great for people who don’t have regular paychecks or expenses. This could be someone who occasionally get overtime hours, freelancers, or people who want to plan for expenses that don’t happen each month (Ex. back to school expenses).

If you don’t have many accounts to track or you just want to focus on the basics, this would be a great option.

The free version does limit you to 10 regular categories and 10 annual categories, but hopefully that should be sufficient. If not other options will allow you to do more.

Bill Guard

Bill Guard is going to be closer to Mint than it is to Good Budget and it is a great option for those having account security high on their list of priorities.

All apps are secure, but Bill Guard provides extra helpful features.

For example:

  • It includes your TransUnion credit score
  • ID theft protection
  • 24/7 live support
  • $1M ID theft insurance
  • Black market surveillance

They also provide you with alerts of potential fraudulent transactions and a map of where purchases are being made (you’re alerted if it’s used in an area where you’re not).

For people who love numbers, they also have strong spending analytics to figure out just where your money is going each month. Again, the easiest way to determine if this app is the right one for you is to simply try it out and see how you like it.

Feel like a budget master?

If not, don’t worry.

It takes practice.

But don’t stop learning, don’t stop reading.

The more you know, the more confident you can be in the fact that you are making the right choices. And those correct choices will be unique to you.

What choices do you make with your budget? What has helped you stay on track with your finances every month?

I invite you to share because everyone (including me!) can always learn more when it comes to finance.

Sharing is caring :)

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