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5 Tips on How to Set a Budget

May 14, 2013 by Lisa Park + 4 Comments

Set a Budget

When some people hear the word “budget” they feel that it’s a limitation of what they can spend. But in fact, budgeting helps you prioritize your spending and manage your money. By planning and monitoring your budget, it will help you identify wasteful expenditures, adapt as your financial situation changes, and achieve your financial goals. A budget also helps you to avoid going into debt, and it helps you to save money.

1. Evaluate Current Spending
In order to create a budget, you first need to identify how you’re spending money now. First evaluate your current spending by writing down a list of all the expenses you have over the course of a month. This includes a mortgage payment, car payments, auto insurance, groceries, utilities, entertainment, dry cleaning, auto insurance, retirement or college savings, and essentially everything you spend money on. The key for this process is to create a monthly average.

I like to use Excel to track our spending. If you aren’t familiar with Excel, then below are some examples of budget spreadsheets that will help you get started on how to create a budget.

10 Free Household Budgets
Free Budget Spreadsheets
Budget Worksheets

2. Total Monthly Income and Expenses
Once you place your current spending and income on a budget sheet, if the end result shows more income than expenses, you are off to a good start. If you are showing a higher expense column than income it means some changes will have to be made.

3. Make Adjustments
If you have accurately identified and listed all of your expenses the ultimate goal would be to have your income and expense columns to be equal. This means all of your income is accounted for and budgeted for a specific expense.

If you are in a situation where expenses are higher than income, then you need to look at your variable expenses to find areas to cut. You should be able to shave a few dollars in a some areas such as eating out less, cutting out cable, or not getting your nails done to help you get closer to your income.

If you feel you’ve cut everywhere you can, and your budget it still tight, then look for ways to bring in more income like selling items around the house, babysitting, or finding a part-time job.

If you have excess money in areas of your budget, plan to wisely use that money. The first thing you want to do is build up an emergency fund that is at least 4-6 months’ worth of your income. That way you can avoid using credit cards for car repairs, medical co-pays, or any unforeseen expenses. After you build an emergency fund, then prioritize the excess money to areas of your budget such as retirement, savings, or paying more on credit cards to eliminate debt faster, as well as saving for items you want.

4. Set Specific Short-Term and Long-Term Goals
Make sure to have specific short-term and long-term goals you want to achieve by sitting down and discussing with your spouse what it is you both want to work toward. This could be buying a new home, getting out of debt, starting a family, taking a family vacation, or purchasing a new vehicle. For our family, we regularly discuss our short-term and long-term goals. And many of the goals we work toward are things we want to do together as a family.

A big part of budgeting is assessing all your expenditures to see what can be cut and put toward your goals. Think about things from a cash perspective, especially the big-ticket items. The next time you want to splurge on an item, think about how many extra hours you’ll have to work to cover the cost. It’s important to also learn the difference between needs and wants. Aim to spend no more than 90% of your income. That way, you’ll have the other 10% left to save for the bigger goals.

5. Track Spending
Once your budget is created, then track your spending using a notebook or budget spreadsheet to make sure it stays within those guidelines. In order to not overspend, try using a cash-only budget. With each paycheck, take cash you will need during the month and place it in assigned envelopes. Paying with cash forces you to stick to your budget, and you will be more likely to carefully evaluate every purchase you make. You’ll also begin to ask yourself, “Is this in the budget?” and “Do I need this?”

A budget is something that will regularly need to be changed and tweaked. It is important to review your budget on a regular basis to make sure you are staying on track. You’ll be able to see where you did well and where you may need to improve. If you’re finding it hard to meet your goals, you may need to revise the budget to accommodate your needs.

What other tips do you have for how to set a budget?

And here are other budgeting articles:
5 Tips on How to Maintain a Budget
How to Effectively Talk Finances with Your Spouse

Filed Under: Budgeting, Money-Saving Tips, Saving Money

Comments

  1. Lisa Park says

    May 22, 2013 at 9:29 pm

    Thanks I will.

    Reply
  2. Dejan says

    March 16, 2016 at 7:34 pm

    Great post

    Reply

Trackbacks

  1. How Our Emergency Fund Helped Us & Tips to Build One Up says:
    July 23, 2013 at 3:55 pm

    […] Before you begin building your emergency fund, be sure that you are meeting your basic living expenses. And as you are building your fund, reduce your spending in areas of your budget such as food, clothing, etc. to avoid going into debt. Here are some helpful tips on budgeting. […]

    Reply
  2. Tips to Save Money in College - Saving Cent by Cent says:
    September 30, 2013 at 4:05 am

    […] to know how much you are spending each month and what it’s being spent on. Take time to Set a Budget and track your spending so you won’t have to worry if you will have enough money each […]

    Reply

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Hello, I'm Lisa

I enjoy teaching people how to live frugally so they can live within their means while still enjoying and doing the things in life that matter most to them. I'm here sharing tips about budgeting, saving money, meal planning, simple recipes, and more.

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We were hoping we would get a few more years out o We were hoping we would get a few more years out of our water heater, but unfortunately after 17 years, it gave out. This morning we had cold showers, which wasn't very fun. ☹️

What I am grateful for is that we have a home repairs sinking fund. This is where you set aside money for expenses that are predictable. You know the expense is coming up, and instead of waiting until you need to pay for the expense and there is no room in your budget for it, you plan ahead by creating a sinking fund and set the money aside until you need to pay for that expense.

We knew that items in our house would eventually get older and we would need to replace them. 

Years ago, we started to set aside a little money each month in an envelope so when a household item breaks or needs replaced, such as our water heater, we can pay for it with cash and not have to go into debt for it. Even $20 or $50 set aside a month will start to add up over time. That may seem like such a small amount. But saving a little money each month is better than nothing.

I also feel grateful that my husband is very good at fixing items around the house. He knows how to install water heaters, which will save us money by doing it ourselves.

#fix #doityourselfhome #fixit #brokenwaterheater #savemoney #savemoneytips
This American Flag Fruit Pizza is an easy fruit pi This American Flag Fruit Pizza is an easy fruit pizza dessert that is made from a sugar cookie mix topped with a sweet frosting and fresh berries. It's the perfect treat for the 4th of July or another patriotic holiday.

The link to the recipe is below or message me and I'll send you the recipe.

https://savingcentbycent.com/2021/06/29/easy-american-flag-fruit-pizza/

#fruitpizza #fruitpizzarecipe #flag #americanflag #flagfruitpizza #americanflagfruitpizza #4thofjuly #fourthofjuly #4thofjulydessert #fourthofjulydessert #easydessert #patrioticdessert
If you want to save money on something, not buying If you want to save money on something, not buying anything at all will save you more money than buying something on sale.

Before you purchase something, think about whether you could instead make it yourself, get it used, fix it, do without, or find a less expensive alternative.

When you do head to the store or go online to shop, think before you buy anything by asking yourself these three questions:

- Is this item a necessity?

- Can I absolutely afford this item?

- Have I done everything to ensure that I'm getting the best deal?

If it's something you want, wait 2-3 months to see if you really still want that item. And during that time start to save up for it by putting money aside in an envelope or in an account.

In a few months, there's a chance you might not want it. But if you do still want it, then you've already starting saving money to purchase it so you can pay cash for it.

#moneysavingtips #savingmoney #savemoney #savemoneyfixityourself #moneysaver #shopping #beforeyoushop #beforeshopping
This Southwestern Chicken Salad has lettuce, avoca This Southwestern Chicken Salad has lettuce, avocado, tomato, bell pepper, green onions, corn and black beans. Mix in a creamy ranch taco Greek yogurt dressing for a delicious summer recipe. 

Message me or use the link below to get the recipe.

https://savingcentbycent.com/2022/06/22/southwestern-chicken-salad/

#chickensalad #chickensaladrecipe #southwesternchicken #southwesternchickensalad #salad #saladrecipe #summerrecipe #summerrecipes
Have you ever thought to yourself, "I don't know w Have you ever thought to yourself, "I don't know what to cook for dinner." Well, here are some dinner ideas for you. 

Message me or use the link below to see 20 easy weeknight dinners for the family.

https://savingcentbycent.com/2019/08/20/20-easy-weeknight-dinners-for-the-family/

#easydinners #dinnerideas #familydinnerideas #familydinner #dinner #dinnerrecipes #easydinnerideas #easydinnerideas
Making these shredded beef tacos tonight for dinne Making these shredded beef tacos tonight for dinner. It took me less than 10 minutes to put it in the crock pot. It will cook for 8-9 hours, and then I'll shred it and serve it with tortillas, cheese, lettuce, tomatoes, salsa, fresh onions, sour cream, and limes.

Message me or use the link below to get the recipe.

https://savingcentbycent.com/2019/09/26/the-best-crock-pot-shredded-beef-tacos/

#shreddedbeef #beeftacos #shreddedbeeftacos #tacos #tacotuesday #easydinner #easy Dinners #simpledinner #simpledinners #crockpot #crockpotmeals #crockpotbeef
We were hoping we would get a few more years out o We were hoping we would get a few more years out of our water heater, but unfortunately after 17 years, it gave out. This morning we had cold showers, which wasn't very fun. ☹️

What I am grateful for is that we have a home repairs sinking fund. This is where you set aside money for expenses that are predictable. You know the expense is coming up, and instead of waiting until you need to pay for the expense and there is no room in your budget for it, you plan ahead by creating a sinking fund and set the money aside until you need to pay for that expense.

We knew that items in our house would eventually get older and we would need to replace them. 

Years ago, we started to set aside a little money each month in an envelope so when a household item breaks or needs replaced, such as our water heater, we can pay for it with cash and not have to go into debt for it. Even $20 or $50 set aside a month will start to add up over time. That may seem like such a small amount. But saving a little money each month is better than nothing.

I also feel grateful that my husband is very good at fixing items around the house. He knows how to install water heaters, which will save us money by doing it ourselves.

#fix #doityourselfhome #fixit #brokenwaterheater #savemoney #savemoneytips
This American Flag Fruit Pizza is an easy fruit pi This American Flag Fruit Pizza is an easy fruit pizza dessert that is made from a sugar cookie mix topped with a sweet frosting and fresh berries. It's the perfect treat for the 4th of July or another patriotic holiday.

The link to the recipe is below or message me and I'll send you the recipe.

https://savingcentbycent.com/2021/06/29/easy-american-flag-fruit-pizza/

#fruitpizza #fruitpizzarecipe #flag #americanflag #flagfruitpizza #americanflagfruitpizza #4thofjuly #fourthofjuly #4thofjulydessert #fourthofjulydessert #easydessert #patrioticdessert
If you want to save money on something, not buying If you want to save money on something, not buying anything at all will save you more money than buying something on sale.

Before you purchase something, think about whether you could instead make it yourself, get it used, fix it, do without, or find a less expensive alternative.

When you do head to the store or go online to shop, think before you buy anything by asking yourself these three questions:

- Is this item a necessity?

- Can I absolutely afford this item?

- Have I done everything to ensure that I'm getting the best deal?

If it's something you want, wait 2-3 months to see if you really still want that item. And during that time start to save up for it by putting money aside in an envelope or in an account.

In a few months, there's a chance you might not want it. But if you do still want it, then you've already starting saving money to purchase it so you can pay cash for it.

#moneysavingtips #savingmoney #savemoney #savemoneyfixityourself #moneysaver #shopping #beforeyoushop #beforeshopping
This Southwestern Chicken Salad has lettuce, avoca This Southwestern Chicken Salad has lettuce, avocado, tomato, bell pepper, green onions, corn and black beans. Mix in a creamy ranch taco Greek yogurt dressing for a delicious summer recipe. 

Message me or use the link below to get the recipe.

https://savingcentbycent.com/2022/06/22/southwestern-chicken-salad/

#chickensalad #chickensaladrecipe #southwesternchicken #southwesternchickensalad #salad #saladrecipe #summerrecipe #summerrecipes
Have you ever thought to yourself, "I don't know w Have you ever thought to yourself, "I don't know what to cook for dinner." Well, here are some dinner ideas for you. 

Message me or use the link below to see 20 easy weeknight dinners for the family.

https://savingcentbycent.com/2019/08/20/20-easy-weeknight-dinners-for-the-family/

#easydinners #dinnerideas #familydinnerideas #familydinner #dinner #dinnerrecipes #easydinnerideas #easydinnerideas
Making these shredded beef tacos tonight for dinne Making these shredded beef tacos tonight for dinner. It took me less than 10 minutes to put it in the crock pot. It will cook for 8-9 hours, and then I'll shred it and serve it with tortillas, cheese, lettuce, tomatoes, salsa, fresh onions, sour cream, and limes.

Message me or use the link below to get the recipe.

https://savingcentbycent.com/2019/09/26/the-best-crock-pot-shredded-beef-tacos/

#shreddedbeef #beeftacos #shreddedbeeftacos #tacos #tacotuesday #easydinner #easy Dinners #simpledinner #simpledinners #crockpot #crockpotmeals #crockpotbeef
We were hoping we would get a few more years out o We were hoping we would get a few more years out of our water heater, but unfortunately after 17 years, it gave out. This morning we had cold showers, which wasn't very fun. ☹️

What I am grateful for is that we have a home repairs sinking fund. This is where you set aside money for expenses that are predictable. You know the expense is coming up, and instead of waiting until you need to pay for the expense and there is no room in your budget for it, you plan ahead by creating a sinking fund and set the money aside until you need to pay for that expense.

We knew that items in our house would eventually get older and we would need to replace them. 

Years ago, we started to set aside a little money each month in an envelope so when a household item breaks or needs replaced, such as our water heater, we can pay for it with cash and not have to go into debt for it. Even $20 or $50 set aside a month will start to add up over time. That may seem like such a small amount. But saving a little money each month is better than nothing.

I also feel grateful that my husband is very good at fixing items around the house. He knows how to install water heaters, which will save us money by doing it ourselves.

#fix #doityourselfhome #fixit #brokenwaterheater #savemoney #savemoneytips
This American Flag Fruit Pizza is an easy fruit pi This American Flag Fruit Pizza is an easy fruit pizza dessert that is made from a sugar cookie mix topped with a sweet frosting and fresh berries. It's the perfect treat for the 4th of July or another patriotic holiday.

The link to the recipe is below or message me and I'll send you the recipe.

https://savingcentbycent.com/2021/06/29/easy-american-flag-fruit-pizza/

#fruitpizza #fruitpizzarecipe #flag #americanflag #flagfruitpizza #americanflagfruitpizza #4thofjuly #fourthofjuly #4thofjulydessert #fourthofjulydessert #easydessert #patrioticdessert
If you want to save money on something, not buying If you want to save money on something, not buying anything at all will save you more money than buying something on sale.

Before you purchase something, think about whether you could instead make it yourself, get it used, fix it, do without, or find a less expensive alternative.

When you do head to the store or go online to shop, think before you buy anything by asking yourself these three questions:

- Is this item a necessity?

- Can I absolutely afford this item?

- Have I done everything to ensure that I'm getting the best deal?

If it's something you want, wait 2-3 months to see if you really still want that item. And during that time start to save up for it by putting money aside in an envelope or in an account.

In a few months, there's a chance you might not want it. But if you do still want it, then you've already starting saving money to purchase it so you can pay cash for it.

#moneysavingtips #savingmoney #savemoney #savemoneyfixityourself #moneysaver #shopping #beforeyoushop #beforeshopping
This Southwestern Chicken Salad has lettuce, avoca This Southwestern Chicken Salad has lettuce, avocado, tomato, bell pepper, green onions, corn and black beans. Mix in a creamy ranch taco Greek yogurt dressing for a delicious summer recipe. 

Message me or use the link below to get the recipe.

https://savingcentbycent.com/2022/06/22/southwestern-chicken-salad/

#chickensalad #chickensaladrecipe #southwesternchicken #southwesternchickensalad #salad #saladrecipe #summerrecipe #summerrecipes
Have you ever thought to yourself, "I don't know w Have you ever thought to yourself, "I don't know what to cook for dinner." Well, here are some dinner ideas for you. 

Message me or use the link below to see 20 easy weeknight dinners for the family.

https://savingcentbycent.com/2019/08/20/20-easy-weeknight-dinners-for-the-family/

#easydinners #dinnerideas #familydinnerideas #familydinner #dinner #dinnerrecipes #easydinnerideas #easydinnerideas
Making these shredded beef tacos tonight for dinne Making these shredded beef tacos tonight for dinner. It took me less than 10 minutes to put it in the crock pot. It will cook for 8-9 hours, and then I'll shred it and serve it with tortillas, cheese, lettuce, tomatoes, salsa, fresh onions, sour cream, and limes.

Message me or use the link below to get the recipe.

https://savingcentbycent.com/2019/09/26/the-best-crock-pot-shredded-beef-tacos/

#shreddedbeef #beeftacos #shreddedbeeftacos #tacos #tacotuesday #easydinner #easy Dinners #simpledinner #simpledinners #crockpot #crockpotmeals #crockpotbeef

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