How to Create a Budget: 5 Simple Steps to Creating a Budget

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You have been thinking of creating a budget for months now.

But the truth is….

Budgeting is such an inconvenience, isn’t it? Between finding motivation, gathering bills, and finding a pencil WHAT THE HECK…

It’s just one HUGE annoyance.

Even hearing the word “budget” makes you feel some type of way.

The kids will even be like “aww” as if the saddest thing has just happened and they don’t even know what a budget is.

I recently sent out a survey and I asked, “What is your biggest issue financially?” One response stated, “As an adult, my mind doesn’t think I should be limited to a budget LOL.” And of course, I laughed.

But it’s the truth. Many adults feel that they shouldn’t be limited to a budget because they worked hard for their money and they should be able to do as they please with it. I agree! You should be able to do whatever you want with it.

But the truth of the matter is, while you may be spending your money as you see fit, you have underlying issues that you may have not even considered. Such as your expenses, emergencies, and how about your FUTURE.

A budget doesn’t have to limit you.

Perspective is everything. Budgeting allows you to feel in control. It gives you an “I’m handling it” type of attitude. I need you to understand the tone and attitude I had when I said that. It’s an attitude of confidence and control.

A budget is your key to having control over your finances. A budget informs me that all my bills will be paid and when. It will also allow me to view my money in a different way so I can see beyond just a paycheck.

To know you are able to pay your bills and still have money left over is a great feeling.

What if there is no money?

Even If there is no money left over, that’s ok because “I handled it”. I took care of what needed to be taken care of and I’m not worried or stressed. It’s freeing.

In order to live life certain things are required and we call those things necessities. A budget ensures that these necessities are covered.

Ultimately, the point of a budget is not to bind or limit you, but to focus your money on the areas of your life that are a priority.

A Budget has a way of directing you, well I guess I should say your finances, and you know that if you follow those directions you will end up at your destination.

Today, I want you to focus on creating a budget the simplest way possible – pen and paper. Yes, I know there are electronics and apps and all of that, but you need to learn the basics of budgeting first and then you can graduate to the extra stuff.

I’m personally old school, I love the power of pen and paper, it has a way of allowing me to connect to what I’m doing that electronics just can’t.  But you may be the one for technology so if that will allow you to work better, go for it.

Creating a Budget

So how do you begin to create a budget? Well, it’s not rocket science and the truth is most people can create a budget. The problem comes with actually implementing the budget and sticking to it.

1. Determine Your Income

In order to budget effectively, you will need to know how much income you have to budget with. For most people, this is relatively easy because they get paid the same amount every pay, whether that’s weekly, bi-weekly, twice a month or once a month.

If you have an irregular income, base it on the minimum amount you bring home during any given month.

2. List Your Expenses

This step needs your utmost attention because you need to know what you need to pay and when you need to pay it in order to create a budget that works. So take out a piece of paper and list all of your bills, and the due date for each bill and the amount. If you are anything like me this list will be in order by due date (it’s the accountant in me). List any other expenses also, even if it doesn’t have a due date. It’s important that you list everything.

If you spend money on it, list it.

So that money you spend every morning on Starbucks should be on the list. You can later figure it into your food budget.

When I budget I break things up into three groups because it allows me to focus on what needs to be paid first and then I can get a little creative with the money I have left over. I would suggest you do the same.  comes to your budget you will generally have your bills/expenses, necessities, and if feasible, your “committed” expenses.

The three groups are:

  1. Bill/Expenses
  2. Necessities
  3. “Committed” Expenses (use the word committed a lot in the accounting world)

As stated before bills should be listed with due dates and amounts. Don’t forget those subscriptions such as Netflix and Prime. 80% of my clients fail to include those in their budget. Even if it’s $0.99/month for extra icloud storage INCLUDE it.


Necessities are the things you and your family can’t live without; usually food, medications (if applicable), and you can include gas if you have a car. The cell phone should have been included in the bills 😂

If you are like most and wondering how to slay the Goliath of your budget, which for most is the grocery portion of the budget we will discuss this in the next step.

Committed Expenses

Your committed expenses are where you can get creative. Usually, it consists of the things that you may or may not spend money on every single month. This is where that “extra” money goes after you have budgeted for bills and necessities.These include items like gifts, entertainment, savings, vacation, haircuts, or clothes. Just set a realistic amount you need towards these things and then add to them as you see fit. Here are a few examples of our committed expenses:

This is the LAST area you should focus on.

These include items like gifts, entertainment, savings, vacation, haircuts, or clothes. Just set a realistic amount you need towards these things and then add to them as you see fit. Here are a few examples of our committed expenses:

  • Hair
  • Clothes
  • Vehicle Maintenance
  • Allowance
  • Savings
  • Retirement
  • Vacation
  • Holidays/Birthdays

So you may be asking where to put the money for your committed expenses. If there is something that you know you will be doing within the next month just stash it in a lock box in your closet. But if it’s money that you are saving to go towards retirement or vacation the best thing is to have a savings account dedicated to those specific funds.

A general rule of thumb: if you are saving to establish a larger sum of money than open an account for it.

For example, my eldest daughter and I get our hair done every two weeks faithfully. So, I’m not going to go put that into a savings account. I’ll just remove the cash from my account on my pay day and put it into a lock box (I deal with cash because once it’s gone, it’s gone.) However, for our retirement, holidays/birthdays, vehicle and vacation I have a savings account specifically for each of those expenses.

Make sure that if you have a combined savings account for Holiday/Birthdays like myself, that you keep track of what you are putting in it and whom it is for. I have four children and a husband and I was not about to open up five birthday accounts and a Christmas account plus have all my other accounts. I just keep track of what amount and for whom on my own. You can do this electronically or on paper. But if you have a smaller family or don’t mind opening up over twenty savings accounts, by all means, have at it.😉

 3. Food Budget

I referred to your food budget in the last step as tackling your Goliath. That’s because the food budget is the hardest part to figure out for many people because it often changes. Usually depending on if you’re hungry when you go to the store or you decided to take your kids grocery shopping with you (the latter does it every time).

Your food budget should include going out to eat and any grocery shopping. So all those McDonald’s or Starbucks runs should be considered.

If you are not sure how much you spend on groceries or food, try to recall your past few grocery store trips or try to dig up some grocery store receipts. If all else fails head over to your online banking and review your bank statements.

In order to conquer your food budget, you will have to develop a system.

For example, our grocery budget is $125/week. I grocery shop with cash ONLY and make sure I always have a list. I also have a grocery store price list that I created by just taking my past grocery receipts and entering the prices into a spreadsheet. This way I can get an estimate of how much it will cost before I ever step foot in the grocery store. We rarely go out to eat, but I do sometimes make a quick Micky D run when I’m running low on time. So I usually just throw an extra twenty bucks on top of my grocery budget.

What about cleaning supplies and toiletries?

This is another big thing you want to consider when doing your food budget.

Many people include their toiletries and items needed within their home within their food budget. I do! So if you are like me make sure you take this into consideration. If you don’t, then you can list them as household items and place them under Necessities.

4. Determine Your Budget Frequency

Your Budget frequency is simply how often you budget within a month

Many people go with a traditional monthly budget, where they create one budget that carries them throughout the month. However, I would recommend budgeting based on your pay frequency.

For example, my household has a check coming in weekly, so every Wednesday I create a budget right before payday. So instead of having a monthly budget, we have a weekly budget.

I know you may be thinking budgeting once a month is hard enough. But to be honest it’s ineffective for many because it doesn’t keep you attentive. This allows you to keep a consistent focus.


Creating a budget that corresponds to each pay helps you direct your money more effectively, especially when you are just starting out.

When it comes down to determining when you are going to pay things, budgeting based on your pay frequency will put you right where you need to be. You will be able to correspond your due dates to your pay dates.

For example, I am using the month of July pay dates July 7th and 21st in this example. If you get paid bi-weekly you know that you will usually get paid twice a month. You will create a budget right before your first pay of the month (preferably on the 5th or 6th) and determine what due dates fall between your pay date (7th) and the day before your next payday (20th). The bills with due dates falling between those dates will be paid with the pay received on the 7th. You will repeat this every pay.

The list you created in step two will help with this, especially if you have your expenses listed by due date.😀

5. Update and Commit

Things in our lives are constantly changing. Pay off expenses. Add expenses. We have more money. We have less money.

Just make sure you are keeping things consistent and up to date.

If you fail to keep your budget up to date it will never work and you will continue to have a hard time.

Also, stay committed. You can not budget one week then a week later you’re not. A budget requires commitment and attention. So be intentional about making time to create your budget whether that’s weekly, bi-weekly, or monthly. Just stick with it.

Putting It All Together

We have gone over five simple steps to creating a budget, so let’s put it all together with three simple tasks: (Here is a sample budget)

Task 1 – On a clean sheet of paper or spreadsheet add your income to the top.

Remember this is based on your budget frequency you chose in step four so if you are paid bi-weekly, this should be a bi-weekly budget. You will take the total of your household income for that pay date.

Task 2 – Subtract all of your expenses that have due dates corresponding to that pay along with your necessities.

Need Help? Refer to step four. Note your food budget should reflect your budget frequency. So if your monthly food budget is $800 and you have a bi-weekly budget frequency then your budget should only reflect $400.

 If this turns out to be a negative number, look for ways to cut your current bills and your food budget.

Suggestions include:

  • Minimizing cell phone bills by going to Walmart they actually offer some great prepaid phone plans.
  • Eliminate cable and get Netflix or Amazon Prime
  • Plan your meals weekly and create a price list

 If this number turns out to be positive, then you can proceed to your committed expenses.

Task 3 – Subtract committed expenses.

Remember your committed expenses should be broken up according to pay frequency, just as your food budget in task 2.

If you have money remaining, AMAZING! But don’t just go blow it, make a plan for it. Do you have some debt you need to pay off? Maybe you want to reach a savings goal earlier than anticipated or start investing? This is how financially successful people use their extra money.

And you have just created a budget.

Let me just say how absolutely amazingly proud I am of you. Tackling your finances can be a scary thing, especially when you just don’t know where you start.

Well, my friend, it’s just the beginning and I have such high hopes for you and I hope you do as well I believe.

Stay motivated, Love often, and Keep the faith!

What are you thinking?

Let me know in the comments if you have ever created a budget before? Did you fail? If so, tell me what you think went wrong or what went right or maybe both.

If you need some extra motivation then read! When I first started getting my finances in order personal finance books were my friend. It gave me such great insight and it got me excited about getting to where I wanted to be. So here are some great books I hope you will check out:


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  1. Shelby @Fitasamamabear August 3, 2017
    • Jasmine Golden August 3, 2017

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