It is a brand new year! One thing I love to do at the beginning of the year is set my annual goals and priorities for the year. The other big thing I do at the start of a new year is take a look at the family budget. This includes reviewing expenses and income, as well as working out the estimate for what we would like to spend on each category in the coming new year.

This really sets the tone for what we plan to accomplish together as a family. For example, if we are planning on taking a trip, then we would make sure to include that in the budget and estimate the cost of all aspects of the trip. Then break it down into monthly amounts to make it easier to save for.

What’s that you say? Making a budget is way too much work and you don’t know how to budget. Well then, I have great news. Budgeting is a simple process, that I can walk you through! Once you set up one month it is easier each month to use the previous months budgets with minor tweaks! Also, it really can help you plan for large purchases like vacation, cars, home improvement, and of course the Holidays! I will not say it will not take some work, because it totally will. But I promise that creating a budget and working to stick to it will save your family money-making it worth the time you put into it! Imagine what you could do with extra funds, a vacation, pay off debt, start a business, or save it for a home!

So here we go!

Steps to Make a Simple Budget

  1. Understand what you spend each month.
  2. Use that information to formulate an estimate of what you will spend in each category each month.
  3. Add all sources of income (regular job, side hustles, anything that brings you Benjamin’s 🙂
  4. What is left over direct to any new or current savings or investment plans you have in place.
  5. Track expenses during the month to make sure you stay within budget.
  6. Use what you learned from the previous month to make your budget for the next month, tweaking where you need to.

Do you have any idea what you spend each month?

Step One is to figure out where are your money is going!

The first and most important thing to do when creating a new budget is to understand where your money is going. If you really have no idea what you are spending month to month, it will be difficult to budget for your expenses in the future. I would recommend pulling a few bank and/or credit card statements to see what you spend in each major category, they often will categorize them into the proper category.

Once you have an idea of what you are spending each month you can estimate each category for the next month. Since we are at the start of January, start there! For example here is what my budget looks like for just my expenses (not our actual expenses):

Budgeting 101- How to create a budget- sample expenses

This information will be highly useful in making a plan of what to spend each month in each category. Maybe you had no idea that you were spending so much on groceries each month. Then maybe it might make sense to change the way you grocery shop. The issue is that if you do not know what you are spending, but are living pay check to pay check, then you have no idea where to start to fix the problem (over spending!).

Now take what you know and apply it to the next month

Once you have gathered the estimate of what you spent in each category, it is time to use it to estimate your budget for this month. Take that information and use it to put together a budget for each line item.

As a rule of thumb you want to use after tax income in each main budget to be approximately:

  • Housing: 25% – 35%
  • Transportation: 5% – 15%
  • Food: 10 – 15%
  • Personal Care: 5% – 10%
  • Health Care: 10% – 15%
  • Loan repayment: 7% – 15%
  • Utilities 3% – 7%
  • Entertainment: 1 – 5%

Note that this is just an estimate. If you are not exactly in that range, it could be because you live in an urban area for example. Use this as a guide, not a one size fits all, because when it comes to budgeting it is way too personal!

Insert the estimated amount for each category into your budget. If it is a one time annual expense, like property taxes, divide the total estimated amount due by 12 and place the monthly amount into your budget. If it a budget that is not the same amount each month, like electricity or gas, used an average of the last 12 months.

The Monthly Budget Worksheet Estimator is where this information should go.

Work on your Income

OK, so now you have all your expenses in the sheet. What next? Time to think about where your income comes from. I mean everything. You take home pay from your steady job, child support, alimony, any side hustles you have, for example I have 2 Ebay shops that I sell items on, interest income, dividend income, rental income, are some more examples. Put all these on the sheet.

One thing to note. If you have freelance income and you are not sure what amount to you, I recommend using an average of what you make. If this is the primary source of income, then in months where you make more you need to stock away the amount that you did not have in other months. Does that make sense? It is a way to even out each month.

Time to Put the rest to Work!

Now your budget worksheet should be complete. At the bottom there is a spot to total all Income and Expenses. Now take the total income number and subtract your total expenses. If there is a positive number you have excess or a surplus. If it is a negative number you have a deficit.

If you have a surplus

You have excess funds after paying all your expenses. Awesome!! That is a great start. I would recommend placing the excess funds into a savings or investment account. If you are new to investing, check out Micro Investing. Or start a 529 investment account or IRA account. If you choose to start one of those, please speak to a licensed professional. If you are not ready to take that leap, use it for your vacation fund, home fund, etc. Just know that each month the bottom line should be as close to $0 as you can get it.

If you have a deficit

If you have a negative number at the bottom, don’t panic just yet! Take a quick look at your expenses. Are they inflated? Do you really spend $100/month on clothes? Do you need to? Maybe you can adjust or tweak a spending budget down. I would recommend looking at your food budget, as that tends to be where we spend a significant amount of money. If that is the case for you, I would think about giving just my Grocery Budget a Makeover.

I know you may be tempted to lower your savings amounts. I would say do not even think about it! You need to pay you first. That is one of the most important budgets on the list! The more you save the better to weather unexpected emergencies, large expenses like a washer, not paying Christmas or Vacation on the credit card. Keep the savings budget!

If you have looked at every budget and cannot find a way to lower it enough to get your budget total income less total expenses to $0. Then, I would seriously think about a side hustle. But that is a post for another day!

Now comes the hard part

You need to stick to your budget. This can be hard. I would recommend keeping a close eye on what you put on your Credit Cards, spend in cash, etc. To do this I created a handy Monthly Expense Tracker. I would recommend writing it down. It really works better when you are budgeting if you put the pen to paper. While it might take some time to get the hang of it, you will really see where your money is going and give yourself a chance to fix it!


Here you can find all the forms used. They are super simple, but VERY efficient!

Check out the Monthly Budget Worksheet- Estimate Only

Check out the Monthly Expense Tracker

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