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:



What number did you get when you subtracted your income and expenses?

If it was negative...

It is time to adjust your spending. Can you decrease your expenses? Take a look at some of your variable expenses. Can you decrease your grocery and food budget? What about cutting out some of your less-than-necessary bills, such as subscriptions and gym memberships?

If you have a bare-bones budget and cannot decrease any further, then it's time to focus on increasing your income. This can be easier than it sounds. You don't necessarily need to job-hop. You can pick up a side hustle. Some ideas include:

  1. Selling items from around your home (OfferUp or Facebook Marketplace)

  2. Online Teaching or Tutoring (VIPKid)

  3. Freelancing/writing

  4. Dog Walking

  5. Esty Shops

The possibilities are endless here. Do you have a skill that you can monetize? Think creatively. Almost anything can be turned into a source of income.

If it was positive...

Make a plan for the rest of your money. Lack of planning is one of the biggest money thieves. How many times have you thought "money just disappears?" This is what happens when you fail to plan for every dollar!

Give that extra money a job and make it work for you. Some ideas:

  1. Extra debt payments (become debt free faster!)

  2. Savings (do you have that emergency fund complete?)

  3. Investing (there are plenty of apps that make investing in stocks and index funds simple for beginners - check out Robinhood)

  4. Sinking funds (what planned expenses do you have coming up?)

  5. Saving for a down payment (real estate in you future plans?)

  6. Saving for retirement (can you increase your contributions at work? How about opening a Roth IRA?)


That's it! Remember to return to your budget regularly to ensure you are on track. Once you have gotten the hang of things, you can consider using an automated app, such as Mint or EveryDollar. I'm more of a pen-and-paper girl, it helps me be mindful and intentional with my money. If you like to write things out as well, check out my budget planner freebie.

Remember, you can always reach out to me if you have any questions!

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