How To Make A Budget

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What is the best way to start a budget?
The first thing that anyone who wants to make a budget must do is to compare their income versus their expenses. The good thing is that it is quite easy to do.

To get started you can download this free Excel budgeting spreadsheet (or you can look through 10 other budgeting spreadsheets) which will help you calculate how much you spend each month and compare it to your current income.

It’s too bad most of us never learned this in school and had to figure it out on our own – so here is the lesson that we should have learned in 5th grade:

Expenses  >  Income  =  Bad

&   Expenses  <  Income  =  Good

And honestly, as simple as it sounds, that is the key to wealth. Anyone, and I mean anyone, who IS wealthy (I emphasize IS because I am not talking about people who appear to be wealthy, but who are actually in debt up to their eyeballs) spends LESS money than they earn. AKA – their expenses are less than their income.

The great news about this is that anyone can do this – no matter what their income level. If you can do it on a small income, then you can do it on a large income. If you can’t do it on a small income, then you won’t be able to do it on a large one either. Trust me!

If you don’t believe me, just ask all of the lottery winners who went bankrupt within years of winning millions of dollars.

Back to making our budget…

Regardless of how your expenses and income compare right now – get excited, because you can easily change it!! If it is bad you can make it so much better!! If it is good, you can still make it even better!! I will show you how later, but for now…

How to make a budget for lazy peopleLet’s make a budget!

Did you calculate what your monthly expenses and income were? Were your expenses less than your income? If so, you are a rare breed who is in great shape, so just sit tight for a minute.

For everyone else, whose expenses exceeded your income – you are not alone. You actually have a lot of company. The problem is that it isn’t good company! Most of our debt-ridden society is in the same boat, but you are one of the bold ones who is jumping out of the debt boat!!

So, if your income is $1000 and your expenses are $1200, that means you spend an extra $200 each month that YOU DON’T HAVE!! What your job is now is to find out what you can get rid of or quit buying each month to save that $200. If you have no idea where to start you can check out these money saving tips or browse other money saving ideas.

I know, I know – this is the part that hurts. Just like pruning a bush – cutting back hurts, but ultimately you are going to yield so MUCH more fruit because of it!!

The goal here is to get your expenses and income to AT LEAST be equal. Once that is accomplished we can work on eliminating wasteful spending or cut other costs to bring the expenses below the income.

Now that you have calculated what your monthly income and expenses are we can start designing our budget. We will first discuss the less effective, but easier method for budgeting…

The world’s easiest budget

There are 2 simple rules to do a simple budget:

  1. You can’t spend more than you earn – carrying a balance on a credit card is not allowed.
  2. Money must go to the budget categories as soon you get paid.

The way it works:

Rather than having 10-20 different budgeting categories of items to be budgeted for you only focus on the 1-3 most important ones and let the rest of the chips fall where they will.

So, to do this you take your paycheck of say $1000 and right off the top you put the money to your main priorities. For many people this is tithing to their church, retirement savings, college savings for children, etc…

A sample of this would be:

$1000 (paycheck)
– $100 (tithe)
– $100 (retirement savings)
= $800 (for the rest of the bills and everything else)

It is absolutely critical that the money gets taken out FIRST for these few budgeted items. If not, I can almost guarantee that the full amount will not make it as intended.

I highly recommend making this process automatic by using direct deposit or some other form of automatic withdrawal. There is just something about human nature that has a hard time staying consistent with things like this.

Why do you think the U.S. government takes our taxes directly out of our paycheck, rather than coming to collect the full sum at the end of the year? It is the same principle – use it to your advantage.

Easy budget, but not very efficient

I think this budget is perfect for people who don’t want to budget. It is simple, doesn’t take up much time, and will help you reach some savings goals. That said, it is still inefficient and leaves the door wide open for inefficient and foolish spending.

I think it should be considered the “lazy man’s budget” – and you are not LAZY and you are willing to work to get your finances in order!! I know this because you are still reading. So, since you are NOT lazy and are hungry for more of a challenge, let’s look at how the pros budget.

The money saving budgeting method

Yes, this method takes a little bit more time and energy, but it also will provide you will long-term financial benefits if followed.

To do this we are just going to expand on the lazy man’s budget mentioned above. Rather than having just 1-3 categories of items budgeted for, we are going to create as many as we need to put a limit on our spending in all areas.

You can use the budget spreadsheet (mentioned at the top of the article) as a guide for tracking your progress. Try to account for every possible expense that you could run into. You will never be able to budget for every possible scenario, but the goal is to minimize surprise expenses. Inevitably, there will still be surprises from time to time – so I suggest creating a category for these surprises (or you can just use your emergency fund).

How to stick with your budget

The almost sure-fire way to make a budget that fails is to NOT budget for any fun stuff. I wrote about how budgeting should be fun and it is a necessary ingredient for success. You need to budget for clothing, entertainment, going out to dinner, or whatever else it is you love to do! The key is to do it in moderation and to set limits and abide by them.

The amazing thing is that by budgeting for fun stuff, it actually liberates you to spend money on these items. When you have money budgeted each month to buy clothes, the money is now sitting there waiting to be used for that assigned purpose. Suddenly you can go clothes shopping without feeling guilty!!

This is how budgeting truly becomes fun. When you have money sitting in the bank waiting to be spent. Or, even better: if you start budgeting for vacation and after a little while you have hundreds of dollars begging to be spent on a vacation!! You go on your trip and come back home and don’t owe any money to a credit card company – now that is how a budget becomes fun and what helps you stick with it!!

I also suggest you check out the envelope budgeting method, or the method that I used to budget with ING.

Other budget options

There are many ways to make a budget work. The key is to finding a system that works for you and sticking with it. This article has gone over a basic method of budgeting, but if you need a little more hand-holding, and are willing to pay a little for it, I suggest YNAB budgeting software.

It is what I use and I would argue that it is the best budgeting software out there (although Mvelopes isn’t a bad budgeting tool) and makes the whole budgeting process as simple as it can be. But be warned, it isn’t a magic tool that is going to eliminate all the work – it will just make it easier to manage the budgeting process.

As far as paying for budget software I think it depends on the user. It is not a necessity by any means, but investing a few bucks could save you some time and make the process a little easier. It just depends on personal preference really.

Either way, I suggest making sure that you are committed to this whole budgeting thing before buying the software  - no one likes to waste their money!  But if you do decide to go with it, make sure you try it out first with their 34-day free trial.

Homework:

1. Create your budget!

This article is part of our FREE 4-week email course to help you save hundreds of dollars, get out of debt, & better organize and manage your finances. Get the rest of the lessons here.

I would love to hear what budgeting method has worked for you and what hasn’t. Let us know in the comments below…

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102 Comments
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  1. @Turn…
    I agree with you on the supermarket – it is easy to blow your budget with groceries each week, personally I set a limit on groceries and we basically force ourselves to stick to it… But you are right that is one of those tough areas, because obviously we need food to survive – so we will buy it no matter what…

    • Groceries always seems to be the budget breaker. No matter how strict you are with what you want to spend, it’s easy to get tempted to impulse buy. I’ve taken to drawing cash out of the bank and that’s all I use.

  2. I love your ideas! Unfortunately, I can only tells you what does not work. The biggest thing… is having a spouse on a completely different page regarding this issue! If I could say one thing to anyone considering marriage…talk about money issues…make sure you are on the same page as your intended. It makes the bumps in life,and they do come, so much easier to handle. I have been married long enough to know…things are not going to change…but I love learning any little thing that I can do to help.

    • Jan,
      I completely agree. I think you need to talk about quite a few things before marriage, money being one of them. As much as I want to budget, it is hard when your partner wants to live so spontaneously and sometimes carelessly. Granted we still have a ways to go before retirement and kids, but I want to start early. Hopefully with this advice and the money earned vs money spent spreadsheet, it will help get us on the same page.

  3. @Jan
    Thanks for the words of wisdom – hopefully those who haven’t taken the leap will listen to your counsel. I agree, it is a big issue that would be very difficult if both sides are not on the same page.

    On a side note, I have learned from experience that trying to change the other person doesn’t work either!! However, praying does!! I have seen it happen in my life over and over again – I try to change someone to no avail, but then I start asking for God to work and he does. Sometimes He makes changes in the other person and sometimes He changes me. But either way He takes care of it.

  4. I wish everyone thought budgeting was easy. It’s easy to write down numbers. It’s hard to discipline yourself.

  5. Nayyar Bagan

    I have project of real Estate its 992 Flats(2bedroom & 3
    bedroom)both cost is 146000rs,but installments is 2bedroom is 3000rs and 3bedrooms is 3500.
    and also we have commercial place(like Nursery,Gym,Supermarket)
    Nursery monthly rent is 10000rs
    Gym rent is 24000/month
    Supermarket rent is 95000/month
    We have A,B,C,D,E,F Blocks
    In A block 6 buildings Each bldg 4floors,each floor 8flats 4*8=32Flats 2bedroom is 96 and 3bedroom is 96
    B Block 4 bldng 32*4=128 flats 2b.r 64 and 3b.r is 64
    C Block 6 bldg 32*6=192 flats 2b.r is 96 and 3b.r is 96
    D Block 5 bldng 32*5=160 ” 2b.r is 64 and 3b.r is 96
    E Block 5 bldg 32*5=160 ” 2b.r is 64 and 3b.r is 96
    F Block 5 bldg 32*5=160 ” 2b.r is 64 and 3b.r is 96

    can u help to make Budget of above project.
    Thanks

  6. being married at very young age budgeting is the single most rule to stay intune with what you do and how you do it sofar as paying bills and having fun.

  7. I am so grateful for your budgeting tips and template…as a student about to start my first year of college i felt overwhelmed by all the money issues but i feel assured that with your budgeting guide and alot of prayer i will be able to over come all the challenges that are thrown my way both financial and stress related. Thank you once again…

  8. Tjiratjiza Kaumbungu

    Good Advice. Keep it up

  9. These are some very good tips for budgeting. They say that many everyday millionaires budget really well. They’re the ones with suits that are 5 plus years olds. You don’t see or hear about them going on constant shopping sprees, running up their credit card bills. You hear about them spending on what they can afford and investing.

  10. what are the advantages & disadvantages of using Quicken or microsoft money for someone who is paralyzed with fear & overwhelmed by the thought of setting up a budget? Great website !Lots of useful info!

  11. I feel so overwhelmed at the idea of trying to create a budget. Both my husband and I have fluctuating incomes. His can be $1800 one week (including taxes we have to withold) but it might be $0 the following week – or even two. He’s a driver and if the load/miles aren’t there, it’s all we can do to try to make the lease payment and other fees that come out before he sees a paycheque. My income is more stable, but still changes as much as $100 or more from week to week. I don’t even know where to begin. The bills sure seem steady!

  12. Also try mint.com for budgeting and tracking expenses. It’s free.

    • Jacob, I agree mint is a great starter tool for tracking what you spend. Minus- can’t track your cash, doesn’t know what checks are floating, & doesn’t track pending transactions at your bank. For most people Mint is a “best guess” as to how much money you have. But, I do love that it’s free.

  13. Bob, your excel spreadsheet doesn’t have a category for kids! Big omission for those of us trying to budget and also educate and care for our kids! Items might include child care or tuition, kids’ clothes, allowance, stuff like that!

    • Katie, that is the beauty of budgeting, we all have different situations and each one needs to be tailored to the individual…

  14. That was easy but sticking with the budget is the hardest part. I guess I should try some method that will help me stick with it.

  15. I think you have some very good advice on starting a budget and i appreciate it. However I don’t work regularly some months I don’t work at all and if I do it’s only 1 or 2 days a month. My husband works full-time while I take care of our 6 soon to be 7 children. He makes plenty of money to pay the bills and then some because we don’t really have a lot of bills but he never seems to have enough money. He keeps “his” money seperate from “my” money and he rarely gives me money for groceries, diapers, school functions etc. I get a small social security check for one of my children from a previos relationship but it never seems to be enough I need help budgeting that money for my self and my kids. I if you can please help and please keep my family in your prayers. Thank You & GOD bless you!!!!

  16. Good morning and God Bless You, Bob!,

    Your website and tips are AWESOME for beginning budgeters like myself. I do have a question though. I own my own consulting business, and so monthly income changes, how can I establish a budgeting system that accounts for that? Any guidance would be so appreciated, again, God bless you and those you love. Thanks for the wonderful example of generosity of spirit and resources.

    In joy,
    Nicole

  17. Hi Bob,

    Yes, I agree with your previous readers, and especially about being on a different page with your spouse regarding household budgeting.

    You see, my wife likes to just buy anything and everything all at once and always forgets to leave money behind for her transport to work.

    When I ask why she does not budget, she always replies: “So you can give me some of the cash you have budgeted to give me for emergencies like trasport to work.”

    I guess that’s why they call marriage ‘the blues.’

    And thanks, Bob, for the wonderful tips. Your budgeting tips will also help me, especially in my life insurance business as each customer has to prove afford-ability of the monthly investment required. And the majority of prospective customers out there know ZILCH about budgeting their incomes!

    Just look out for my subscription to your newsletter., please. I don’t want to miss any of your next updates.

    Have fun budgeting, everyone!

    Andrew

  18. mrs vivian Dike

    pls i would like to know if i am spending my monthly income wisely, i have been investing all my monthly income in buying land these past three years becos of these my husband is totally responsible for all the expenditure in the house,even now i still want to save from the money he gives to me,it is like i feel guity spending money,even i feel bad if i spend money on food,pls help me to plan my fiannces.

  19. JERRY L COLLINS

    Hey folks! Boy do I have a method of grocery buying to share!! This is what I’ve been doin that has allowed me, (combined with other ideas on this site), to save nearly $5000.00 in almost 3 months! It takes a while longer but if saving YOUR money is MORE important to you than the extra trip through a grocery store, then this is for you! I have 100.00 set aside for groceries every time i get paid un-employment, (employed as of tomorrow!). I take a calculator, note pad and a pen with me to the store, pick up my coupons and special deals and start walkin. I know without a doubt all i can spend is 100 so i start finding things I need and try to fins it cheaper in or around that same aisle. If I do or don’t, I put it on my list along with the price on the other edge of the paper and on to the next item. The mental list is totaling so I’m not blown that far away when it comes to the next step. When I’m done in the store, I either go back home or back out to the vehicle with my calculator, my list, my pen, coupons and sale items. I start adding up the prices of all of the items. You guessed it, if its more than I have allocated for groceries, I pinch it away until it falls inside my budget, taxes included. Then, when I get to the checkout, I give them the coupons and my “store member savings card” and what-duh-ya-know! It comes out with me walkin out of the sotre with EXTRA SAVINGS MONEY FOR THE SAVINGS ACCOUNT! unless you want to put it back in to the grocery envelope for unexpected grocery items that may pop up ;-) Have fun and God bless all!

  20. Great website Bob!

    My wife and I started our new budget this January. A couple things that have really helped us are the use of Google Docs and our iPhones. We use Google Docs (on our iphones) to jointly update our Budget Spreadsheet as well as store our receipts in folders by month. I’ve really been happy with the app JotNot Pro which allows me to take a picture of the receipt, have it converted to pdf, and then email it to my Google Docs folder. Then I don’t have to worry about storing/losing receipts. Everything is then easily available to my wife and I for tallying up our expenses on a weekly basis. I hope this tip can help others as well.

  21. I’ve used Mvelopes in the past, but I’m now using an iPhone app called iVelopes. It was $2 or $3 to download but no fees after that. It doesn’t import transactions from your bank, but it does allow you to clear transactions which makes it super easy to balance when your bank statement arrives. It can handle checking and savings, credit cards, and loans.

    Like several of the other posters, I have variable income. Each time I get paid, I try to budget only 90-95% of my income and leave the rest ‘unbudgetted.’ My goal is to get to the point where I have one whole month’s income waiting to be budgetted. At that point I’ll be able to budget once a month, using February’s income to pay all my March expenses. Hope this helps someone.

  22. Hi Bob
    I really love your article i am 23 years old, i’m married and have a daughter.Now i think we are pretty good financially, we own a home,pay for car, bills bills bills>>e.t.c, and still have money left over. Now how can i put some of our extra money into buying assets, like stocks or something. I really do not know how that works>> thanks :)

    • Ana, I’d sit down with a stock broker (there are many companies out there like Edward Jones as just one example) that can explain how stocks work. There’s a lot on ChristianPF as well if you use the search bar! :D

  23. stephanie

    Finally, I have opened my eyes and see I am still in debt even after filing for bankruptcy!!! Still living from paycheck to paycheck! Too clueless to know. I have decided to take CHARGE of my personal finances today. Soooooo, with God holding my hand and just taking baby steps, I am pressing forward. Thanks for all the encouraging letters.

  24. Thanks for this great post, I just had my cc stopped for like the thousandth time and now really have to do something about it. The s/sheet you attached is awesome and as soon as I can download some of that software (need to get cc re-activated lol) I’m going to get myself along to a DA Skype meeting to keep the whole thing moving. I’m not a Christian but I do respect your faith and this excellent post if testament to that.

  25. claude

    i am 17 about to turn 18 i am so overwelm on what should i do and how to do it and the hardest part seems to be getting started

    • Start by recording EVERYTHING you spend money on for a month. Then look at categories: are you spending on food, clothes, housing, entertainment, eating out, donations, savings, retirement, emergency fund. Loosely group the expenses together and look at your outgo. If you don’t like what you see, start thinking about what you would like to change and brainstorm how to bring the changes about.

  26. Amy is right! There are many people who do not know to handle money but with the posts in these site, it can make them know how to. Thanks Bob.

  27. Thanks for the suggestion on YNAB. This is a great budget software program. Definitely helpful for those with variable incomes!

  28. Shukriyyah Atkins

    I have tried many computer programs. I have used Microsoft Money, Quicken, and You Need A Budget. The hardest thing for me is the bank debit card. It is so easy to use. With it, it is easy to go over your budget. The category for me that I struggle with the most is food. I am single with know children. When I cook it seems as though I waste the food because of how much I cook and eating out is terrible for my pocket and health. I need help sticking to a budget.

    • Do you record every transaction with your bank debit card as you make it? If it comes out of your checking account, record in your checkbook and total. That helps you keep track of what you have left and lets you see where/what you are spending. Don’t just tuck receipts everywhere and never track!

  29. How do you get your spouse to buy into a budget when we often ‘rob Peter to pay Paul’? I have tried to budget before and often became discouraged trying to hang onto all of the receipts and remember to write everything down; now that I am remarried (second time for both of us and neither of us have ever budgeted) the dollars seem to be stretched to the max now, I’m pretty sure that my husband is not going to be a happy camper when I present this to that he will need to keep track of his spending – even though the goal is to be financially fit. I have two more years of school before I will be working full time; praise the Lord, my schooling is paid, so that isn’t an issue, but I am limited on my financial input.

  30. I have a buget system that works for me…or perhaps I should call it more of an expense tracking system so I can figure out what not to pay as a result of my husbands — and ok on a much smaller scale, my — over spending. In order to try something that can be better stuck to I’m trying your suggestions. As I put in all the numbers I was astonished at how much I had left over. How could this be when we are struggling to get by each month as it is? I went back and forth between your spreadsheet and mine and discovered you left out a HUGE line item for most families: DAY CARE! That is one significant area that cannot be cut back on. Even if we moved into a less expensive rental and got rid of one of our vehicles I’d still have to work to make ends meet and that means day care (no family in the area to help with that). I could find less expensive day care but you get what you pay for. I’ve been there, done that and have decided that the nearly $1300 I pay each month in day care (not including annual fees) for my two kids is worth every penny. Anyway, I’m not complaining about my day care cost, just want to point out that it’s an important item not mentioned.

  31. Thank you for this article and site, genuinely encouraging.

  32. I got a budget on paper,but Ineed someway to put in my computer . I have excel on my computer thank you GROVER

  33. I like your thoughts on how to keep it simple. I broke my budget down into a Google doc. It is easy to keep track of items wherever you are since the doc is always online. I am thinking about using Mint.com to track all my expenses. Any thoughts?

    • Jeff, last time I did a thorough look at Mint (they are continuing to add features) it was a great way to see where your money went. It is beautiful and provides easy to see data of where your money goes, but at the time it wasn’t the best tool for budgeting for the future. So if you keep that in mind I think it can give you a lot of useful information about your spending habits, etc.

      • Yes, it recently has added some nice features. I think I might take the time to set it all up and use it. Then I can give a better review of it. I know it automatically tracks money going in and out according to your account (or that is what my good friend told me). That could be a pretty cool feature. Link it to all my accounts and then know when certain accounts are running low, etc. Way better than my Google doc budget. Although that lays a great foundation.

  34. Stephanie

    Bob,
    I have been working on my budget for some time now, both in trimming expenses and planning spending and I keep getting stuck. I make commission only, and have been trying to use a system where I use my last year’s earnings and divide it by 24 (for each pay period) which will give me my “salary” to work from. I get stuck in my own calculations of monthly, bi-monthly, or quarterly expenses. My budget equation looks a bit like calculus and I get frustrated and confused and give up for a while. I would love to have a program to help me get past the math of all of this. As I look through different websites or programs that can help, I have yet to find one that will let me have variable income. Can you (or anyone else reading) direct me to one? Thanks in advance.

    • Hey Stephanie. One thing that has helped me with my variable income is to have a fund that you pour money into that has a cap. For example, you might have a fund that has a cap of $10,000 (meaning you wouldn’t fund it over $10,000) and you can budget out from that every month. You’ll have to keep your monthly budget necessities as low as possible, say, $2,500 to $3,000. Pull the amount that is right for you out of your $10,000 every month and fund any extra commission money you get that is beyond what you need for the month back into your $10,000 fund. This might give you the buffer you need to get through several months of low income and allow you to refund the account when your commission is rocking! Hope that helps!

    • My husband and I have a variable income and until recently we have had nothing but problems budgeting. My income can vary greatly… up to a 1000.00 every 2 weeks difference in pay and my husbands varies by 100-200 a pay. What I was able to do was calculate what we use monthly. I came up with a rough figure of say $3100.00. This is the must have for bills, expenses number. I then went to last years bank statements and verified our income every month was more than this number (Even with the staggering paychecks (maybe 1 week my check was 650 and 2 weeks later it was 1400) Im not looking at weekly paychecks but overall monthly averages. Once I knew we were now ok with that number, I then took the 3100 and divided it by 4. I threw in a couple of extra dollars and now my husband and I are putting in 780.00 per week (we each get paid bi- weekly on opposit weeks) into our checking account. Anything we make over, goes into a seperate account. If your paycheck is not 780.00 we go into the seperate account (call it the cushion) and deposit the difference bring the 780 account to 780. We do not touch anything not spent in this account. Overage stays in there, I will move it out of that accout at the end of the year. This account is the do not touch for any reason because it has to go to bills and ness. living expenses.

      This only works if you are 2 weeks (starting) to 1 month ahead (ideal) on bills. So a good time to start this is after tax time if you recieve a tax check or some sort of influx in cash to get you ahead enough to be able to do it. As you income is variable you have to be able to have time to make up the difference if 1 or 2 checks per month are off.

      Please note as well that I took my monthly budget and divided it by 4. As my husband and I are paid on opposit weeks, one of us gets a paycheck every week. There are 4 months this year with 5 week paychecks. Even without my cushion, the 780 program will have extra money in it as well as the cushion account. This enables us to actually have a little bit of savings, be a month ahead on our bills and still have play money. I dont know if I did things right but it is working so far so I hope this helps someone else.

  35. Bob,
    My daughter is 19 going on 20 and is getting ready to move out on her own she has a full time job making only minium wadge and a few tips here and there. She is convinced that she can make it on her own in a small apartment and will not listen to me on how to make or stick to a budget. Do you know of any web sites that could help her lay out a budget so that she can see in black and white that its not going to be as easy as she thinks. Any advice that you can offer would be most helpful.
    Thanks a million,
    Amber

    • Aradia

      Probably a bit late now Amber, but I’d just draw up a general list of expenses (I did this with my daughter when she first thought she would move out of home).
      rent, utilities, estimate food, fares, phone/internet, clothes (ask her how much she spent last month/quarter/year), hair/skincare/makeup etc. it was a real eyeopener for my daughter. Admittedly I estimated a little over but it made her think twice :-)

  36. I have twins that are about to go to college and I have had a hard time budgeting for the expenses. I thank you for your article. I may have found it too late, but maybe I still have some time.

    Thanks

  37. Thanks so much for the tip – looks great!

  38. I am wondering about What Numbers to use when creating a Budget. Gross or Net? Although Net seems Obvious, what about 401k contributions, Flexible Spending accounts, Uniforms or Tools that are part of Payroll Deductions?
    What about Overtime hours?
    Should 4 weeks be used (If paid weekly) or 4.33?
    I have heard some people use 4 paychecks in the Income Side and putting a weeks pay into a savings account for the months where there are 5 paychecks in a given month.
    I guess the hardest part for me is trying to play ‘Catch-Up’ with a Budget… Living week to week, and then an Emergency happening and having to take money from ‘Utilities’ or ‘Food’ to Cover an Auto Repair (etc)… Then it turns into a Juggling Act!
    This article is Very Helpful though, and Much Appreciated… Thank You and God Bless!

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  41. In London in 2012 things are not as simple as you put it. There are fixed costs like rent which simply cannot be reduced. If rent, council tax etc and basic food allowance adds up to more than your salary, what do you do?

    Rent is sky high in London in 2012 and salaries have been greatly reduced. I am currently redundant looking for work in my area of experience which will pay enough to cover these fixed costs. It simply no longer exists! My savings (based on wise housekeeping, along the lines you have given) are running out fast over the last 4 years. I am getting increasingly concerned about how to survive once the savings run out.

    • Aradia

      I don’t have an answer specifically, but things to consider are living more frugally – sharing an apartment, choosing a cheaper apartment, using cheaper cuts of meat in your cooking, getting a job, any job to help stretch money.

  42. What is the solution to my situation?

  43. Cerani

    I have a problem. I cannot leave a store without spending at least $50 on things I probably don’t need. It has caused fight after fight with my husband and now neither of us are working because he is in school and I’m a new mom. I really want to save money and get out of debt but it seems impossible when we don’t have an income and I can’t seem to overcome my ridiculous shopping habits!! HELP ME!!!

    • It comes down to discipline Cerani. DON’T go to those shops in the first place. DON’T take cards or money with you. If you don’t have money how can you spend it?

      Sell some things you already have to make some money to pay off your debt. Work through the budget. Put a process in place. Pay attention to your money.

  44. Has anyone heard about http://www.moneyslinger.com? I never had a problem with the budgeting part, it was the follow through that was so difficult. This thing is very different than others i’ve tried. I’ve been using it for about 3 years. It combines expenses into 2 groups (fixed and flexible) and averages them so the expenses are the same every month. Really helps for tracking.

  45. I’ve been doing a written budget every single month for years now. It’s especially important for me because my income can vary greatly from month to month. You never know if you’re wasting money or not if you don’t keep track.

    I believe that doing a detailed budget every month is THE most important tool you can use to always spend less than you make and stay out of debt.

    I recently wrote a two part series on how to start a budget that may give some additional insight. http://bit.ly/GBpYjc

  46. MeganL

    I have been reading through a lot of articles on your website and based on the information I have learnt, I have started a budget. I have used one of the spreadsheet you provided under http://christianpf.com/10-free-household-budget-spreadsheets/
    The one I have used is the one for budgeting twice a month, which I like as my husband’s pay is once a fortnight.
    The problem I have is that because I have budgeted for every possible expensive (averaging out bills, rates, etc to fortnightly amounts) and also included the “fun stuff” as you instructed – a small amount for eating out, for clothes, haircuts, blow money etc, I have WAY over-budgeted… my expected expenses are a lot higher than our expected income.

    I like the envelopes system and have physically done that in the past, however the problem with my current over-budgeted budget is that just because I have allocated $50 a fortnight to a christmas fund, or $30 to be put aside for upcoming bills etc, that after I have paid the bills we have due, the mortgage, school fees and other direct debits, done the food shopping and withdrawn cash for tithes and other incidentals, etc etc, there is physically no money left to put in the “envelopes” (physically or on a spreadsheet).

    I have downloaded a free trial of YNAB, however this is difficult to get my head around as it works differently – it only allows you to budget the amount of money you have, so you can’t over-budget. This seems like a good theory but it is no different to what I am doing without a budget – looking at the amount of income we have for the fortnight, allocating it to pay the most important things and the most current or over-due bills, and then waiting for the next pay fortnight. It is not allowing me to budget for things like upcoming expenses or a christmas fund etc, which having an over-budgeted budget was allowing me (on paper) to do – even though I actually am still not able to do this as I can’t physically allocate more money than we earn.

    I am not sure where to go from here (aside from the obvious beginning to cut back on things – although it’s all the fun stuff that will go, as you can’t cut back on paying power bills etc). Doing up a budget has so far only served to highlight the fact that our expenses are more than our income – which is depressing as it means we will either have to stop things like day-care, ballet, gymnastics for the kids etc, or just go back to the way we were before a budget – living pay week to pay week, paying for things as needed and surviving… but only just.
    I am sorry this is a long post and is not going to be of any assistance to anyone… and I am not sure if you are likely to have any advice for me!

    • I know what you mean. My husband and I had been married for 2 years and had a small baby when we went to go see 2 different Christian non-profit credit counselors for advice about how to get a handle on our finances. Both advisors, after looking at only our fixed expenses: rent, daycare, utilities, and gas for the car to get to work, and food, we were already OVER what our income was. They both seriously said, “I can’t help you until you find more income.” HOW is that helpful???? (We couldn’t at the time because it would have created additional daycare costs beyond what we could have earned at the time.)

      So of course we ran up a bunch of credit card debt and student loan debt as I paid for college to be qualified to get a MUCH better paying job. It’s 12 years later and we FINALLY have reduced debt by ALOT and are now making more than we spend, at least most of the time.

      So in other words, I don’t really have any advice, because there really was nothing I can see that would have helped us then — we were not spending money on ANYTHING besides necessities, we rarely had meals out and were not getting new clothes or cool electronics. But it did get better, but not before getting worse.

  47. My husband and I have 3 deposit accounts – one we call the “bill account” like the mortgage, utilites, insurance, charity, etc….one we call the “house account” like food, eating out, clothes, gasoline, etc…and the other is a “savings” account used to hold our emergency fund, vacations, etc. – We don’t spend out of either the savings or bill accounts on anything other than exactly what it’s there for. If money isn’t in the household account for that new jacket or phone guess what? We don’t get to have it!!!! This approach has been a tremendous help for us “lazy” budget-eers. :)

    • I use a similar method, a checking account for bills, electronic payments. I have a savings account for emergencies (car repairs, medical expenses) and a savings account I use to transfer funds between the other two accounts, but my goal is to have enough money to actually use the one savings account to “save” money…it works well til about November of each year, when my funds start to deplete and I use credit cards because work slows down, Christmas, gifts, major car repairs.

  48. Aleshia

    There is an app free for iPhone called mint.com that is set up to help budget. For all the tech savvy people they should definitely get this app. Awesome tips, thanks.

  49. Thanks for this post; this will really help many people. I do understand that all of us find it hard to make proper budgetting, that is one of the hardest thing that we can do. But with the help of many advices from you people, it can be easy but of course not that easy, we need to work on it. What we need is proper motivation and also the will to fix it. God bless all of us.

  50. Michelle

    I’m not even sure where to start or even know how to catch up right now, which makes life a little overwhelming. I tithe every month cheerfully (which is drafted) because God has given me a great job with great coworkers and a great life but I am robbing Peter to pay Paul at this point. I can’t even make my rent on time so I will have to pay late which incrues late fees. I’m borrowing from friends to try and catch up and when I think I can pay them back, I end up in the same bind the next month. There are times when I am able to pay my bills but have no money leftover for groceries, gas or entertainment. I feel like I’m merely surviving but not living. Do I just continue to tithe in hopes that God will somehow give me the provision. I pray and wait for as long as I can then have to ask someone for gas money or groceries. I’m really stuck!

    • Michelle, it sounds like you are stuck in quite a rut! You might want to consider signing up for ChristianPF Coaching. Keep in mind that coaches do charge for their services, but they’ll work with you to figure out something that fits your budget. I’d encourage you to consider long-term financial coaching to get and stay on the right track. It’s worth the money.

      • Michelle

        Thank you so much for responding so quickly. I will try what you suggested!

  51. Kevin A. Pieckiel

    How do you handle carryover from one month to the next? For example, if I save $100/mo for auto repairs then after, say, six months I’ll have had a $100 surplus for those six months. If in the seventh month I have a $400 repair I’ll be over budget by $300 for the seventh month! ($100 budgeted minus $400 spent equals $300 overspent). In my mind I know that’s okay, but how do I track that on paper in my budget? Without rollover money becomes like cell phone minutes: use it or lose it.

    • You should roll over certain categories like auto repair. However, I would also add what I call a “cap” to how much you can have in that fund. That way, you won’t be saving up too much money that could go toward other important expenses. At least, that’s how I teach people to budget. Hope that helps!

  52. Great article Bob! I have a small blog and have a feeling I’ll be linking your blog to mine ALOT! My husband and I paid off our house in 33 months (both teachers) by budgeting at the age of 24 (he was 32)!!! And by the grace of God! He’s blessed us tremendously and now we can give more to others and I’m able to stay home with our baby. We follow Dave Ramsey’s teachings. Thanks for this article!

  53. Just wanted to point out that I love the content of your site. I am the founder/developer of buckledownfinance.com and a christian and was looking for some references to the bible and money and came across your site. I’ll definitely be sharing some of the information I’ve learned from here.

    Thanks.

  54. @ Vernon… i think just might name my child Vernon. I like it…
    @ Bob, good going. Your Kids would be so proud of you… Love this blog!

  55. Good to see you both! Great advice. Love your website!

  56. Bob, thanks for this well written post. You have a gift of breaking things down and writing in very simple to understand form.

  57. The principles of a home budget are much the same as for a
    business, only far simpler of course. In a way the home personal
    budget is more difficult in that it just that, personal. It may
    therefore impact other people who are close to you, such as spouse
    and children. That has to be dealt with in a rather different way
    to a business budget. It is far better to agree a budget that all
    parties are working towards and understand. Inevitably the parents
    are the ones that should agree on everything first, but there is no
    reason the children should not be made aware of what their
    allocation is on a monthly basis. In our household the bills get
    paid asap after monthly income arrives in the bank. the bills take
    priority. Out of what remains the other allocations are set aside
    for food, clothes and other essentials. The balance available for
    savings is then split between my wife and I. That generally works
    out quite well.

  58. Good stuff. A budget is crucial.

    I like how you re-framed the notion of the budget in your video. I think this re-framing is pretty important when it comes to those who resist a budget. Many people think of it exactly as your wife described.

    You know what can work when there’s resistance to an idea? Re-brand it. It sounds silly, but it works! Marketers use the tactic all the time. Same product, new branding.

    Let’s re-brand budgeting! “Budget” has such a cold and corporate tone – why would anyone want to apply that to their personal life!?

    So here goes…

    First, it needs a new name… and I really like the idea how your wife re-framed the concept. Maybe we should call it something to do with Peace – it seemed that what your wife was describing in her example was that she felt peace… “Financial Peace Plan”? Maybe something there, but I bet other readers could come up with something even better. Of course everyone could use their own name, but I’m sure there’s a great name that everyone could use so we’re speaking the same language.

    Along with the new name should come a re-framing of the concept. It’s not a restriction, it’s an enabler. This “Financial Peace Plan” (or whatever we come up with!) enables us to reach our financial goals. It will enable us to retire when we want, or to buy our first home, or [insert goal here]. The “Financial Peace Plan” is a tool that, when used properly, helps us construct our dreams.

    Peace

  59. Paul Koti

    This is simply Awesome I am craving to get such stuff and Lord fulfilled my hearts desire and get enlightened.
    May the Lord Bless abundantly Bobs Ministry as the way Bobs activity is a Blessing for many. I LOVE IT.

  60. My husband and I have always had variable income. During most of our career, his paycheck followed the construction industry, layoff or short weeks when it is down and 40-hour weeks when there was demand.

    We have used a variation of the envelope system since the 1970′s. Fixed expenses are funded first (mortgage, lot rent, utilities, car insurance, etc). Once the envelopes have enough money to pay those bills, then we put money in the other envelopes (food, entertainment, gifts, etc.). It sometimes took the entire month to earn the basics, but we are a quiet couple who doesn’t need to spend money on restaurants and concerts. We both enjoy cooking, gardening and hobbies.

    We are heading into retirement in 18 months. We are enjoying your course as we are very uncertain of how to design a retirement budget. We won’t have a mortgage since that only has a few payments left, but we have no idea of how much to budget where.

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