How to Make a Budget (Even if You Hate Making Budgets)


I have started roughly 138 budgets in my life. Approximately.

I hated every single one of them.

I always thought of a budget as a diet for my money, a strict set of rules about what I could and couldn’t eat spend. Making a budget left me feeling deprived and angry, and wondering how in the hell I’d managed to afford the shoes I just bought, because on paper I sure didn’t have any money for them. I decided over and over again that ignorance was bliss, because ignorance let me buy shoes and food. I wasn’t sure why it worked in the real life when it didn’t line up on paper, but it did – so I stayed far, far away from the paper.

The problem was I had no idea how to make a budget or what in the hell a budget really was.

Learning how to make a budget isn’t about forcing yourself to spend less money. Learning how to make a budget is just about deciding and knowing how you’re spending your money.

Whether you write it down or not, you are spending money.

If you write it down, you are simply more aware of how you spend it.

Having a budget gives you the chance to put your money where your passion is, where your values, dreams, and goals are. Having a budget allows you a moment to actively choose between cappuccinos and mission trips, cable and travel. And if you can’t afford cappuccinos or cable? A budget can help you figure out how to change that.

Now, let’s get to it.

How to Make a Budget

There are a lot of fancy programs you can use that can help with this process. I use Microsoft Office Excel because it’s easy and didn’t require another investment. I also use a box of envelopes I bought at the dollar store. I am super fancy and you want to be just like me when you grow up, I know.

1. Figure out how much money you have right now.

You don’t have to wait until the 1st or the 15th or a Monday. You can make your first budget whenever you’re ready. Just start.

The very first step is to know exactly where you’re starting from.


(The numbers and item names being used throughout this tutorial are for example purposes only.)

2. Pay any bills that are due right now.

I just recommend this so that you can get yourself to a true starting place. If, for example, I had a phone bill sitting on my desk that was due today, I’d pay that and subtract that amount from the $1300 starting figure before going forward.

3. Add the income you are expecting during the remainder of the month.


In our house, the only thing that gets added at this point are checks that we have in-hand that have not been deposited, because neither of us have real jobs. If you have a job, this would be when you add in the checks you’re pretty damn sure you’re going to be getting before the end of the month.

4. Subtract Your Fixed Expenses


I use the AutoSum function (that button that kind of looks like an E) to keep a running total from section to section. I also format my excel sheet so that my negative numbers show up as red text in parenthesis, but that’s just a personal preference. I put each bill’s due date next to the amount because some months you have to know exactly when that $55 is coming out. You know what I mean.

5. Subtract the Variable Expenses


As the name suggests, these are the bills that vary from month to month. I will estimate the number here based on the yearly average or last month’s bill, depending on what’s most appropriate and most likely to be close as hell. I update this with the exact amount as soon as possible (when I get the actual bill.)

The fixed and variable expenses refer to the bills that have to be paid by check or debit card. Once I’ve entered these in, I now know how much cash I have to use for our cash envelopes and any other “discretionary” spending we might want to do.

But first…

6. Put Money into Savings


I’m not a financial guru and 99.99999% of this is not about me telling you how to spend your money. Those decisions should be based on your values. But having money in savings can make such a huge difference in your life. It can help you avoid going deeper into debt. It can prevent you from losing sleep at night worrying about accidents you can’t avoid. It can give you the courage and freedom to take risks and go after the big dream.

But savings accounts aren’t built on “leftover money”. No one has money left over. If you want to build a savings account, you have to make saving a priority. If you decide to save (and I hope that you do), put it in your budget early.

Now you are ready to divvy up your cash.

7. Decide How Cash Will Be Divided into Envelopes

howtomakeabudgetstep7 There are classes you can take and systems you can buy that will teach you the details of “the envelope system”. We didn’t take any classes or buy any systems. We just made a list of every expense we could possibly pay for with cash, and wrote the name of that expense on an envelope. MAGIC! WE HAVE A SYSTEM!

Each month, we decide how much money goes into each envelope. When it’s time to buy groceries, we grab the food envelope. If the food envelope is empty and we need food, we have to decide between going hungry or taking from another envelope – and we have to decide what, specifically, we’re going without in order to have groceries. More often than not, we’re able to avoid those situations entirely by being able to see at all times how much cash we have left for each expense.

8. Adjust

You might have noticed that we had $61 unaccounted for in our sample budget. Ideally, you’ll plan for every dollar that’s coming in – which means you can now go back and fiddle with your numbers and decide where you’re going to put that extra money. (I usually leave myself a little cushion every month instead of getting it to zero.) Will you save more? Boost your charitable giving? Add to the remodeling fund? Making this decision now helps you avoid pissing away $61 on double mocha lattes when you could be working towards your {insert personal goal here}.

You might also get through this process and realize you have a negative number at the bottom – it happens. You have to go back and make some tough decisions here. Will you save less? Spend less in gas? Go cheap on groceries or cancel the gym membership? These decisions aren’t fun, but it’s empowering to be able to make them once a month and then live with your envelopes.

9. Adjust Again Next Month

One thing I never understood about budgets before was that they are dynamic, like everything else in life. When you get new money in, you make spending decisions again. We sit down at the beginning of every month and make a brand new budget. We make changes based on things we learned in previous months and what specific events may be on the calendar.

As you go through making and then living with a budget, remember that you have all the power here. You get to decide how you’re spending your money, and you can change your mind at any time. Making a budget doesn’t have to mean subscribing to someone else’s value system or following some guru’s rules. The purpose of a budget is simply to be aware so that you can spend with intent and purpose.

It’s your money, after all. Shouldn’t you know where it’s going?

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