Tips on How to Budget & Save Money

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Making a budget is how I got in control of my finances. A budget is a plan for your money. Learn all the tips on how to budget and save money without feeling overwhelmed.

Here I break down everything you need, to make a budget that is going to work for YOU. A budget plan you can stick to.

Sign up to my email list to receive my FREE budget template for excel, budget template for google sheets and all my tips on how to budget!

Table of Contents

Why should you have a budget?

You’re reading this for a reason, so you have a money goal in mind. Whether it’s taking a big vacation, saving for a down payment or paying off your student loans, learning how to make a budget is a great way to start building towards that goal!

Creating a budget is the first step to finally taking control of your money. It’s hard to set money goals when you don’t know where your money is going and what you’re spending on. After creating a budget you will become more conscious of your money habits and discover areas of improvement.

You’ll be able to pay off your debt, save even more, and actually achieve your financial goals.

You might wonder where your paycheck keeps disappearing, and with a budget, you’ll actually know. Learn how to budget and save money now!

Step 1: Understanding your Budget

1. Find a Budget Template spreadsheet you like.

You want to find a good budget template you can use. I like creating my own budget template in excel or google sheets, if you want to use mine I have a free Budget Template for Google Sheets you can use by signing up for my email list and getting access to my resource library!

I prefer something on the computer to easily update or make adjustments. But if you prefer writing it down manually, I also have a Budget Template free printable.

You can also create your own budget on excel or use a budgeting app. It is important to make your budget template personal so it works best for you!

2. One Simple Formula – The Zero-based Budget

Budgeting comes down to one simple formula.

Income – Savings – Expenses = $0

This means we will be accounting for every single dollar. This method of budgeting is called the Zero-Based Budget and it is my personal favorite. If your budget does not equal zero, that extra should be immediately put into savings. However, if you’re left with a negative number, you are spending too much!

Step 2: Setting up your Budget: Creating a Budget that Works for You

Your budget is going to be made of three separate sections:

1. Income

Your income is all the money you make AFTER taxes. Meaning all the money that hits your bank account. You want to make sure you’re including all sources of income here, not just your 9 to 5.

Income Category Examples:

Paycheck
Bonuses
Tax Refund
Side Hustle
Baby Sitting
Gifts

2. Savings

Savings should account for everything you are currently saving for.

Savings Category Examples:

Emergency Fund
Roth IRA
Retirement Account
Trading Account
Down Payment

Note: If you have a 401(k) with your employer, because that money is removed from your paycheck before you receive it, you don’t want to account for that in this budget.

3. Expenses

Expenses need to be broken down a bit further. Not all expenses are bad, and a lot are unavoidable.

Necessity

Under Necessity are the expenses that you can’t really get rid of. These are the expenses that come with being a human. This is where you need to think about what is important to you, and what you consider essential.

If you notice, the examples below DO NOT include eating out, or makeup, or transportation (meaning uber rides if you already have a car). These items are not essential, they are a luxury.

Necessity Expenses Category Examples:

Rent
Utilities
Health Insurance
Vision
Dental
Cell Phone Bill
Groceries
Hygiene (toiletpaper, tissues, toothpaste)
Beauty (shampoo, conditioner, soap, face wash)
Gas
Car Insurance
Car Maintenance

Related Posts: Want to see how much I’m spending on? Check out what I spend in a week!

Luxury

Luxury takes account of all your other expenses. Luxury expenses are the things that you enjoy in life but aren’t needed. Things like going out to eat with friends, going to a concert, buying clothing because you want more.

Luxury Expenses Category Examples:

Travel Fund
Eating Out
Entertainment
Clothing
Transportation
Gifts
Things for the apartment (decor)
Makeup

Note: Travel is included here. I recommend keeping a travel account separate from savings because you will most likely be spending this money in the short term, so to me it counts as an expense not a savings category.

The categories you use for your expenses are going to differ person to person. For example, if you don’t own a car, transportation expenses could be considered essential. Figure out what categories you need.

Step 3: All About the Numbers

How Much do YOU Spend

Now the fun part. Each category that you’ve created above needs to be assigned a dollar value.

This means you have to figure out how much you spend for every category you’ve listed. Some of these may be easier than others to calculate, for example, you know how much rent is, that’s an easy calculation, but utilities could vary month to month depending on the weather.

Spend some time figuring out how much you spend per month for each category.

Budget Tips:

If you want to be more accurate when calculating your variable expenses, try pulling up your most recent credit card statement and looking at how much you’ve been spending.
It’s ok to not get this number 100% correct. Your budget will need adjustments and tweaks as you get to know your spending. That is normal and expected! So you don’t need to spend a crazy amount of time trying to figure out how much goes into each category.

What the numbers mean

Now you should have all of your categories created and have filled out how much you spend/save per month per category.

Does your budget equal zero?

If yes: Wow, good job! I’m impressed, what did you do to make it zero? It typically never equals zero at first.

If no:

Is it negative?

If your Net number at the end is negative, this means YOU ARE SPENDING TOO MUCH.

You are currently spending more money than you are bringing in. Take a look at your categories and where you can cut back, you are living above your means.

This is dangerous because it can lead to debt. We don’t want more debt!!

Tracking your expenses will help you get better at figuring out where you can cut back, so if you’re a bit lost right now, that’s ok! You’ll be able to notice your unnecessary spending habits soon!

Is it positive?

Yay!! Congratulations you have some extra cash money to save.

Do not add this to one of your expense accounts! Throw it all into savings. You added the numbers yourself, so you know you don’t need this extra amount.

Step 4: Keep Track of Your Expenses

This is arguably the MOST IMPORTANT PART of budgeting. So yes, you need to write down every. Single. Thing. You spend money on.

It might seem difficult and annoying to do this (and it can be) but keeping track of your expenses is going to be eye opening. This is where you will get to see where your money is actually going, and how much you “accidently” spent on clothing or starbucks.

Budget Tips

Update Consistently: I like to update for all my expenses every week. Doing this consistently will help make it a habit. If you eventually become a crazy budget lover like me, you’ll even enjoy this (queue mental image of me pouring a glass of wine to work on my budget all Friday night).

Have Everything Open: When tracking your expenses have everything you need already open. This means credit card statements, bank accounts, venmo, splitwise and any other application where your money may come in and out. This helps make sure everything is accounted for and nothing is double counted.

Write Down When You Update: If you forget to update one week, you might forget what you’ve already taken into account. If you leave yourself a quick note, you know exactly where you left off. Additionally, if you previously had items pending, you know to now add them in.

If you really hate tracking your expenses, I recommend you do it for at least three months. Three months is long enough that you’ll begin to get an understanding of what you’re spending on and where you could be saving more.

If you can commit to at least three months, the insight you’ll gain on your spending will be worth the annoyance of writing all this down.

Step 5: Make Adjustments

It is completely normal and recommended to tweak your budget!

If you are a beginner at budgeting, it is completely understandable to have your budget be way off from your actual expenses. The point of making a budget is to understand your own relationship with money and establish feasible, attainable goals.

After you’ve tracked your expenses for three months, come back and make some adjustments. If you are consistently overspending in one category ask yourself why. Did you budget too little? Are you spending too much? Try to recognize why your budgeted amount is off.

Once you’ve become a seasoned budgeter you can make updates to your budget once a year. (I make updates every August, because that’s when I’m typically looking for a new apartment and my job adjusts our compensation.)

Final Thoughts

Do what works best for you!! This budget is so YOU can take control of your finances. So YOU can get to know what you’re spending and where you can cut back. For YOU to identify your priorities.

What works for someone else might not be the same as what works for you.

Hopefully this post is a step forward in learning how to create a budget plan! Don’t forget to sign up to my email list for your FREE budget template for google sheets or budget template for excel!

Want help with your budget? Send me an email or drop a comment down below!