How Do You Create a Budget For Almost Anything?

recently wrote about the challenges and logistics of making – and sticking to – a personal or household budget. Based on the reaction, it seems this is a topic worth revisiting and expanding a bit.

It’s not actually all that difficult to create a budget. The hard part is doing it well, and using it in a meaningful way over time. The goal, after all, is not to limit what you can do or who you can be. The goal is to increase your freedom by reducing wasteful spending and unnecessary debt. Like exercising or eating right or paying more attention to your significant other or focusing more on the essentials of your job, parts of it may be uncomfortable or require changing the way we think about things. But, come now… we both know you’ll feel better, not worse, as a result, yes?

This would be a good time to step back and clarify that at no point in this post am I going to tell you what you can or can’t do with your money. Nor could I. I don’t have that kind of power over you. I wouldn’t use it if I did. This isn’t about guilt or restricting you; it’s about making informed decisions about how we choose to spend our money and where we choose to focus our energy and resources.

Create A Budget to Take Control

If you’ve ever taken an economics or business class, you probably remember that “economics” is at its most basic the study of how society uses its limited resources. It’s about how we grow or make stuff, how that stuff is distributed across society, and how we use what’s grown or made. In short, economics is about how we get what we need and what we’re willing or able to exchange for it.

If I buy a $7 coffee on the way to work, that’s an economic exchange, but so is agreeing to do my brother’s chores for a week if he’ll cover for me when I sneak out to see that girl of whom they disapprove. Working all day for $15/hour is an economic activity, but so is eating leftovers all week so you can afford those Hamilton tickets for your wife’s birthday. In each of these examples, choices are being made. You may or may not agree they were good choices, but in each case they were informed choices. The parties involved knew what they were giving up and what they were getting, or at least hoping to get, in return.
Informed choices don’t always work out for the best, but where most of us really end up in trouble are all the uninformed or unplanned “choices” we make. I’ll give you a few basic examples.

Uninformed or Unplanned Economics

You probably have an ATM card of some sort. You can get cash whenever you need, straight out of your checking or savings account. There are a dozen machines in town which either belong to your bank or credit union or have arrangements with them so that using them costs you nothing – no fees, no penalties, etc. And of course it seems like you can’t buy groceries, pet supplies, hardware, or anything else these days without being offered “cash back” when you check out. But of course your kid needs cash for something at school or you just remembered you owe the coffee fund at work $3 and the closest machine wants to charge you a fee to use it.

You’re in a hurry, though, so you do it anyway, figuring it’s only a couple of extra bucks. Still, you take out $60 instead of $20 because it feels like somehow that makes the fee less painful. You give your kid the cash or pay back the coffee fund and forget about it until you check your bank statement a few weeks later, and realize your bank has hit you for a couple more dollars for using an unapproved machine. They didn’t add a note saying, “Dude – there are DOZENS of other ways you could have withdrawn this cash without using THIS machine… what’s WRONG with you?!?” but they might as well have.


Well, at least you were able to take care of what you needed, and you still had $50 left over. You don’t have it now, of course… there’s only $2 in your wallet at the moment. You must have spent the rest of the cash on… well, something. Despite your best efforts, you have no idea where the rest of it went. In other words, you’ve made some unplanned and uninformed economic decisions – you’ve burned through several hours’ worth of your own time and labor (in terms of your hourly income) but have little or nothing to show for it.

And we do this all the time, often in much bigger ways. That’s not freedom, my friend – not if money matters to you. If you were born rich and no matter what you do, the family fortune will cover it without the slightest impact on your personal spending habits, then why are you even reading this right now? For the rest of us, though, the dollars add up quickly, for better and for worse.

The additional interest or late fees when you forget to send in a payment or can’t afford to make it on time. The subscriptions or services you don’t really use but are set up to charge you automatically every month. The eating out when you weren’t really planning on it because the time got away from you. The repair bill you really can’t afford because you skipped essential maintenance or tried to save a few bucks by doing something in a sketchy way instead of following the instructions. Are these really the precious moments of autonomy we don’t want to sacrifice by setting up a spreadsheet or keeping our planner current?

I didn’t think so. Even a simple budget can begin empowering you to make more informed choices.

Create A Budget by Gathering Information

ANY budget starts with gathering some numbers – specifically, your total income and your total current expenses, predictable and otherwise. The “expense” part is where some of us first start to waver. We don’t always realize where all of our money is going each month, and honestly, some of us intentionally avoid thinking about it very much. That’s usually a sign we’re avoiding uncomfortable realities of some sort (see above).

Even once we’ve overcome our tendency towards denial and vagueness, chances are good we’ve forgotten something, or been way, way off with one or more of our estimates. That’s OK – that is, in fact, a big part of why you decided to create a budget… so you have a better idea of what you’re making and spending and how it all works together (or doesn’t)

My wife has kept a detailed personal budget since long before I knew her. I, on the other hand, went through years of credit counseling and painful personal realizations after digging myself into over $10,000 in debt. The first time I sat down with her to sketch out how we’d split up the bills, she wanted to begin, quite reasonably, but getting an idea of what our existing income and expenses. During the budgeting process, we actually decided to call creditors to negotiate our bills and it totally worked. We were already starting to save without even starting the budgeting process. I had no problem with the idea, but in my cluelessness thought it entirely unnecessary. Still, I liked her quite a bit and wanted to keep her around for the long haul, and this seemed like a small price to pay towards that end.

Reality Check, Please

The fixed expenses were easy. Car payments, child support, even utilities were mostly on those “average monthly payment” plans. But when we got to things like groceries, gas, eating out, or miscellaneous expenses, I got cocky. Of course I knew how much I spent on groceries in the average month; I’m the one writing the check! (Yes, this was back when people still wrote checks.) Of course I know how much gas I use in a month; I’m doing the pumping! You get the idea.

I was off. WAY off. Like, hundreds and hundreds of dollars by the time it was all listed. I didn’t know that right away, of course. Not until the facts started coming in. Because now that we were using a budget, I was keeping track of grocery spending, gas in the cars, and how often I stopped at Quik-Trip for a snack or seven. It was embarrassing, but my choices were to either be resentful and blame the spreadsheet or adjust the numbers to reflect reality so I could start making more informed decisions about where and how my limited resources were spent.

Create a Budget by Organizing

Now things start to get serious. Which of your expenses are more or less the same each month? Which vary substantially? Which ones are essential, and which do you have some or complete control over? Which ones are important to you, and which ones are important to your significant other or someone else in the household?

This part can get emotional, but it’s necessary if you’re going to create a budget that actually works – that you’ll actually use and stick to over time and which addresses the most essential wants and needs in your life. We need to know at the very least whether or not your monthly income is currently equal to or greater than your monthly “out-go” before we can get serious about larger, long-term budget goals.

If you seem to always have money left no matter what you do, that’s great – imagine how much more you could have and do with those resources if they were predictable! If, on the other hand, it seems like you barely get by paycheck to paycheck, or – worse – like you keep sliding further behind no matter what you do, it’s even more essential to get the numbers straight. We need to figure out if it’s possible to create a budget that will get things under control with a little discipline and organization, or whether you should start looking for outside help. Will cutting back on eating out fix the problem, or should you be seeking credit counseling? Do you need to cut cable and buy more off-brand groceries, or would the right debt consolidation loan be a game-changer?

Create a Budget by Prioritizing

Let’s assume you’re at least getting by. Maybe the Credit Card balances are creeping up and you can’t seem to ever pay off your brother-in-law, but you’re not in immediate danger of losing your car or home. How can you create a budget to empower you in what no doubt seem like endless expenses and unanticipated frustrations?

Start by listing absolute non-negotiables like house or car payments, or monthly rent. Utilities – the essentials like water and electricity (phones and fun stuff go in another category). Credit card payments go here as well, along with child support or anything else that you have a legal or ethical obligation to maintain. If you have substantial medical expenses or usually end up owing personal income taxes each year, write those down as well.

Take a look at this part of the list. Without being delusional, are there things here you could shave or rework a bit? I don’t mean cutting out on something you genuinely owe, but are there places you could reduce your monthly expense on these essentials?

For example, depending on when you bought your home, you may be paying a considerably higher interest rate than the current average. Would it be worth a little short-term expense to refinance and lower those monthly payments, saving yourself thousands of dollars over time? And those utilities – do you really need the sprinklers on twice a day all summer? I’m not suggesting you neglect your yard entirely, but hasn’t it rained twice this week already?

Even those credit cards might be negotiable. Do you qualify for a lower interest rate with your current card? If not, would a competitor be willing to offer you a lower fixed rate for switching? Don’t get careless, and you’re not likely to find quick-n-easy answers which immediately change everything. But if you’re willing to put in a little time on the phone and explore your options, you may be surprised how much you can save even on the stuff we’d normally consider non-negotiable.

Phones, Internet, and Entertainment

Even if you may not technically “need” your cell phone, it’s the 21st century and there are certain norms and assumptions which would make not having any sort of phone rather difficult. In addition to how unconnected you’d probably feel socially, it’s nearly impossible to secure employment or get yourself admitted into training or education past high school without at least a phone number. So let’s assume you “need” a phone.

Do you need THAT cell phone? That monthly plan? All that data? All those minutes? Maybe your provider threw all that in with the purchase and you’re locked in for another year while you pay off the actual device. In that case, take good care of it, because it would be nice to go a few years after it’s paid for without having to upgrade. But if you have some control over your monthly cell phone plan, use that phone to call customer service. Tell them you need to lower your monthly bill. I’d never encourage you to fib, but it wouldn’t hurt to mention that you’re thinking about switching to a cheaper plan with another company, as long as you take a moment before you dial and actually think about that for a moment. (Like I said, no fibbing.)

You’d be surprised how flexible some companies get if you’re about to cancel. At the very least, they should be able to negotiate a better monthly price for you. Just pay close attention and make sure you’re not (a) committing to something bigger and longer than what you’re in now, unless that’s what you really want to do, or (b) getting yourself talked into something that will cost more every month than what you’re paying now. (Yes, it happens.)

The same basic idea applies to your cable TV package, or home internet, or subscription services. If you really use the service – if Netflix is an entertainment mainstay in your home, and you can afford to keep up with it even if it’s tight – that’s your call. But are you really using that “sports package” they sold you on when you switched cable providers? Are you reading those magazines or online newspapers you signed up for? One of the best reasons to create a budget is to highlight those dollars being wasted on things we don’t really want or need. Individually, it’s only a few dollars here, another buck or two there… but collectively, every month? It’s freedom and capital we’re trading away for nothing, just so we don’t have to pay attention and fix it.

Groceries, Gas, and Good Times

Now it’s time to get serious. How much are you spending a month on groceries? On filling up your car or truck? How about eating out, whether fast food or “sit-down”? Coffee and donuts? Cigarettes? Movies? Impulse purchases as the mall or local box store?

I’m not trying to make you feel bad about buying groceries. That would be silly. I’m not even trying to guilt you out of buying that movie you love that you’ll watch over and over or grabbing breakfast with that friend from work of whom you’re so fond. You create a budget to make those things more possible and more intentional, not so you’ll feel bad about them or avoid them altogether.

Of course you’ll go to the grocery store – but are you going with a plan and a pretty good idea what you’ll need for the week, or are you winging it? If you regularly prepare for the trip by throwing out the stuff that’s spoiling or leftovers you’ll never finish, something’s out of balance. Of course you can like movies and music, but in this day and age is it important to you to own the 4D / Blu-Ray / DVD / Digital Download version with four hours of special features, or would watching it on that streaming service you already pay for work just as well? If you watch the special features in multiple formats, more power to you, but if you don’t, won’t the DVD-only option work just as well for half the price?

We may not be able to control the big things – the medical emergencies, the unexpected repair bills, etc. – but we can do a lot by changing the little things.

Awesome Apps to help you through your budgeting.

Now, one of our sister sites published a great blog reviewing the The Top Personal Finance Apps. Our team on that side of the house did a ton of research. They personally demo’d just about every money management app on the market (well, that’s technically almost impossible because there are hundreds) and picked the best. Seriously, our company is crazy about helping people manage their money. So, I trust their choices. Check it out their picks from this Twitter feed.

Create a Budget by Making the Tough Choices

In a moment I’m going to finish by pointing you to a slew of specific budgeting tips, but first I’d like to ask you two questions. Here’s the first: In terms of stuff which can be paid for with money, what’s important to you?

Don’t pretend there’s nothing or that money doesn’t matter. It doesn’t buy happiness, that’s true. It doesn’t fix all of our problems, unfortunately. But it matters. A lot. Anyone pretending it doesn’t probably has plenty of it.

For me, it was being able to eat out periodically. Not even super-fancy stuff, just normal sit-down restaurants of the chain variety, with maybe a local favorite thrown in here and there. For so many years, it simply wasn’t practical. Even today, a matinee movie (I’m particularly fond of Sunday mornings when there’s almost no one else in the theater) with my wife and some local pub or brewery afterwards… that’s the good life.

What is it for you? A decent vacation once-in-a-while? New clothes at the start of the school year? Finally replacing that truck? Remodeling that kitchen? Maybe you just want to be able to quit that second job.

So here’s the second question: What would it take for you to get there?

Don’t shut down on me, friend. All those hopeless, “we’re doomed” thoughts that just ran through your head? You gotta take charge of those and set them aside. I wouldn’t bother trying to eliminate them altogether- that’s usually a futile and distracting exercise – but you can turn them down. Tie them up. Lock them in the closet so when you hear them, it’s muffled and far away. I’ll give you a moment, then we’ll try again.

Ready? (Seriously, if you’re going to fail, don’t let it be because you couldn’t stop feeling hopeless and doomed. That’s a HORRIBLE reason.)

What would it take for you to get there?

What Would It Take?

Can you create a budget that lets you save a set amount each month and do the math telling you when it’s enough?

Can you cut a few lunches out each week? A few fancy coffees? Can you reduce impulse spending? Make do with fewer shoes? Avoid ordering alcohol or deserts when you’re eating out (because the mark-up on those is huge)? Carpool to save gas? Can you live without a few cool toys if you know it will pay off in three months? Three years?

What about those credit cards? How are we going to pay those down? Maybe you can’t pay them off the way you’ve been doing it, but that doesn’t mean it can’t be done. Same with those medical bills, or that delinquent car payment.

Do you need outside help? Including a personal loan payment in your budget? Credit counseling? It’s possible your insurance covers something like that; you should look. Local agencies often offer classes or can hook you up with professionals at little or no charge. There’s no shame in going to the doctor when you’re sick, or hiring a lawyer if you need legal help. If you have a chance to get out of debt and all you have to do is attend a few meetings, that should be a no-brainer.

Maybe you’re close without all of that and simply need a few new budget tools to help you push through. Or maybe you just need someone in your life to hold you accountable. Maybe you can hold them accountable as well.

Get Alarmed

Create a budget and keep it accessible. Set your phone alarm for a time you’re likely to be home every day. When it goes off, no matter what you’re doing, go look over the budget. Dig around for that day’s receipts. Write down how you spent cash. This part won’t take hours and hours – the key is thinking about it daily. EVERY day.

Once a week, update the budget to reflect reality. Same thing once a month. And keep that phone alarm sounding. Just like getting up in the morning, it has to become an ingrained habit – not to torture you, but to help you take control and make informed decisions.

You can do this. That’s not even a question. The real question is will you do it?

Specific Budgeting Tips

Maybe you have something specific you’re trying to accomplish as you create a budget. Here are some of my favorite subject-specific articles and lists to help you make it happen.

Create a Budget for Planning a Wedding

Your wedding is the best day of your life. However, it might also be the most expensive one... Here is your ultimate guide to plan your wedding on a budget!

And The Knot offers a collection of resources of their own for Weddings on a Budget.

Create a Budget for Taking A Vacation

How can you plan a fulfilling vacation while keeping your trip affordable? We've got tips to help you! Read More:

U.S. News & World Report loves to make lists ranking things. Here are their Best Cheap Vacations in the U.S.

Nomadic Matt takes a more spontaneous and carefree approach to vacationing probably best-suited for those not bringing along little people. Check out his Eight Budget Vacation Ideas.

Create a Budget for Moving (or Staying)

Everyone has a lot of stress in their life but, in terms of the pure amount of stress, moving is right at the top. Building a moving budget helps!

Here’s a more generic breakdown of How To Make A Moving Budget from Consumer Affairs.

Create a Budget for Christmas / Birthdays / Anniversaries

Christmas on a Budget can be tough. Find out what are inexpensive Christmas gifts for the whole family and other holiday budget essentials.

How to Enjoy Christmas on a Budget from the vivacious Wondermom Wanna-Be.

Holiday Gifts for Every Budget from Good Housekeeping.

Step up. Take control. It's your money.