How to Create a Budget

A budget is literally the most important part of personal finance. I cannot stress this enough! Do you know how to make a budget? Maybe you are just beginning and need some assistance. Or maybe you are knee-deep in your personal finance journey and could use a quick reset. Either way, here is an easy step-by-step guide on how to create a budget from scratch!



Before you begin, make sure you have access to:

  1. Bank statement(s)

  2. Calculator

  3. Pen

  4. Paper

Calculate Your Income

Add up any income that comes into your account each month. Think: earned income (your paycheck), side hustles, investment income, etc. Be sure to take into account whether you are paid monthly, bi-weekly, or twice per month. It can be helpful to use a calendar and write down each of your different paydays and amounts.


Calculate Your Expenses

Time to break out your bank statement! Go through and highlight, or write down, each of the bills you pay each month. These can include, but are not limited to:

  1. Rent/mortgage

  2. Utilities

  3. Car payments

  4. Car insurance

  5. Credit card payments

  6. Loan/student loan payments

  7. Childcare

  8. Subscription services

  9. Gym

Calculate Variable Expenses

Now, go back through your statement and calculate your variable expenses. These are expenses that might change in amount month-to-month. Variable expenses can include, but are not limited to:

  1. Groceries/food

  2. Gas

  3. Clothing

  4. Money spent on children, pets, gifts, etc.

Subtract Expenses From Income

Write down the totals you calculated for your income, expenses, and variable expenses and plug them into the following formula:


INCOME - (EXPENSES+VARIABLE EXPENSES)=?


ADJUST or MAKE A PLAN FOR THE REST

What number did