How To Create a Budget (That Works)

Want to find a budget that works for you?
Commit to giving it up and trying something different

Seems counterintuitive, but there’s a reason you’re looking for how to find a budget that will actually work for you. You’ve tried one, or two, or maybe three. And they didn’t work. And you got frustrated. And you gave up.

Good. Now you get to try something else.

Budgets – and finance in general – are not a one-size-fits-all. We are all individual. So whether we like to use cash or credit cards or whether we want to track our expenses daily, weekly, or never that decision will be individual too.

First off, let’s go over some general “budgeting” guidelines:

  1. Decide on your financial goals
  2. Know what comes in and what goes out
  3. Review, adjust as needed, repeat

These will apply to every budget (for the most part). It’s the specifics where your mileage may vary.

1. Determine your financial goals

This will be unique to your situation.
Do you have debt you want to pay off?
Do you want to have 6 months of emergency savings?
Do you want to retire in 10 years?

At first glance, it may seem easy to decide what your financial goals are. But when you really sit down and think about it, this can be one of the hardest things to figure out. If you’re stuck in debt or can’t ever seem to save enough, the idea of having financial goals can sometimes feel impossible.

Let’s start there then – with a little hope.

Reaching your financial goals will be very hard, I’m not going to sugarcoat it. It will require sacrifice and probably a fair bit of hard work. But it CAN be done.

For a little inspiration
Here’s a woman who paid off over $158,000 in debt
Here’s 5 people who each paid off over $100,000 in debt
Here’s a list of 51 people who all paid off varying amounts of debt
And I’m sure you can find more examples of this. My partner and I paid off ~$50,000 of debt in about 4-5 years – all while having 2 kids in 2 years and buying a house. Not every situation is the same, but given enough time and dedication, you can do it.

So, you CAN do it. Now let’s dream big. You’ve just made your last payment and all that debt is gone – now what do you want to do? Feel the pride and relief at having no more debt. Nothing can stop you. What do you want to do next?

Me? I want to have enough money in the next 10 years so that my partner doesn’t have to work anymore. He probably still will, but he has been our provider for so long that I want him to feel the freedom of not having to work. Five years ago, I wouldn’t have thought it was possible. Today – it most certainly is possible.

2. Know what comes in and what goes out

Now we get into the nitty gritty details. This is where you’re going to have try stuff, throw it away if it’s not working, and try something else.

If you find that every month you don’t magically save all the money you need – budgeting is probably something you’re going to have to get used to.

First – you have to know your income.

How much is coming in each month? If it’s variable, make a conservative guess.

Second – you have to know your fixed expenses.

These are all the things that MUST get paid each month*.
(*monthly can work for a lot of people, but if you do better budgeting weekly or quarterly or something – do that.)

Examples of fixed expenses are rent/mortgage, utilities, car payments, minimum grocery expenses, etc. Don’t forget to estimate out things that are paid quarterly or yearly. We pay our insurance once a year, so I just divide that amount by 12 and that’s my monthly expense.

Third – Track your variable expenses.

These are basically everything else. If you lost your job and had no income, these are the things you would have to cut.
This is also the area where most people cut back in order to keep their spending in check. At the very least, you need to know, on average, what you spend on this stuff.

There are lots of way to keep track of this.

  • Pen and paper
    • It works for some, so feel free to give it a try
  • Excel/Numbers/Google Spreadsheet
  • Software
    • Lots of options for this. I haven’t used any of these (except GNUCash), so make sure you can afford it and it has the features you need
    • YNAB (You Need a Budget) – About $7/month
    • Quicken – an oldie but goodie – About $35/year
    • – free, but you’re connecting all of your bank & credit card accounts to track it. Plus, there is always a cost. I’m unsure if they sell your data, but I think they do targeted advertising with other financial institutions.
    • GNUCash – this is a free, java-based software program. I’m only listing it, because it’s what I use and right now I’m loving it. I hate the idea of giving someone else my financial data. This does require some knowledge of accounting and the interface is not as pretty as the others. But I love that it’s free and I can just run it locally (on my computer).

Now, this next idea won’t work for everyone, but I love its anarchist feel.

Just don’t have a budget. Implement the anti-budget.

I first read about this idea from Paula over at Afford Anything. You pull out what you need to save first, then you spend whatever’s left. If there’s nothing left after awhile, then you can’t spend.

This requires a lot of discipline to not use credit cards and you still have to understand what’s coming in and going out. But I love the idea of one day being this relaxed about my money.

3. Review, adjust as needed, repeat

This is the part that can make a budget awesome or horrible. If a little part of a budget, or the whole thing, is not working for you – I give you permission to throw it out! Do it now.

That feels better. Now go find something that works better for you & your situation. Do this as many times as needed. Probably until the day you die, because we all change over time.


Specific tips

I know this is very general, so we’re going to offer some specific tips that I think may also help you. Like I said before, try it and throw it away as soon as it’s not working. Then try something else.

From good ol’ trusty Lifehacker – Tips for sticking with your budget

Starting small

This is always my advice. Implement one small change and as long as it’s working, keep doing that. Once it feels like second-nature, then try another thing. Remember, we’re aiming for long-term change not something that fizzles out after a month.

Stick to your grocery list & don’t shop hungry

Always a good one. If you need to cook meals to stay within your budget, try to have a list. It’ll help keep you on track.

Decide if you really need to spend money on something big

I heard from someone that when shopping online, they’ll put it in their cart and then sleep on it. If they still want it the next day, then they’ll buy it. I’ve been trying it and it totally works. Damn you Amazon and your endless list of things I want.

Figure out your financial goals & remind yourself of them often

This goes with above, but I love the emphasis on reminding yourself. Goals are useless if we forget about them. Vision boards work for some. Meditating on them or writing them down or talking about them with other people can work. Find a way to keep reminding yourself of the “why”, then tracking those expenses or giving up that latte can seem a little bit easier.

Use cash instead of cards

If you’re an envelope person (Dave Ramsey) or just need to feel the pain, try this.

Use credit cards to keep track of every purchase

If you’re a numbers person and need to track every thing (or are really good about your spending and want the extra points), try this.

Avoid advertising

Seriously. Advertising is the worst. Avoid it at all costs.

Research big purchases

I feel like this is a no-brainer, but I’ve been known to throw down ~$1000 on furniture that I absolutely did not need – and am now trying to get rid of.

Pay yourself first

This so much. Put your money into savings first, then see what you have left over. A good (maybe slightly ambitious goal for some of us) is 10% of your take-home pay goes into savings. I think that’s a good goal to start, but try to push it once you hit that. A good rule of thumb is to have at least 20% going into savings – this also includes retirement. Some people push this up to 50%! So boss.

Think about how many hours it took you to earn that

Right? Once you start thinking about this the pain really starts to set in – especially if you hate your job.

From EveryDollar – Steps to help you stick to your budget


Yep – make it as easy as possible. Automate the savings especially if you can.

Plan meals

This can be fun, and it also makes it more fun to eat out when you make it a special occasion.

Talk about your budget with someone

Seriously, even if it’s your cat. Having an accountability buddy for this can be really helpful for some.

My personal thoughts:

Give yourself an allowance

I can’t live without buying little silly things. So I have a budget for that. Your mileage may vary, but I’ve found it very helpful.

We’ve talked expenses, but don’t forget – a budget is twofold: what is coming in and what is going out.

If your expenses are so tight that you can’t cut back anymore (or don’t want to), research how you can bring more money in.
Start doing some work on the side, (maybe go back to your entrepreneurial roots and walk dogs), take on more hours at work, or level up your skills so you can get into a higher paying job. This can sometimes be easier than cutting back more.

You can do this. Your life is yours to craft. Find the elements of the budget (or anti-budget) that work for your life. Don’t be afraid to fuck it up and throw things out. You will mess up and then you’ll learn a lot.

What have you tried and has or has not worked? What’s your personal philosophy on budgets? Share with us in the comments below.
And always be respectful and kind when posting 🙂


Additional Resources:

This one is a good overall source: Top 4 Tricks to Stick to Your Budget

Great EdX course that is free (not currently available as of this posting, but check back because it is really good info): Making Smart Financial Decisions


2 thoughts on “How To Create a Budget (That Works)

  1. My goal this year is to get this shit figured out! Love that you have put so much work and thought into this with sources and everything. You rock!

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