Creating a Budget that Actually Works

Create easy to use budget for home

Creating a budget is crucial to staying out of debt, planning for the future and keeping your credit scores in good shape. The first step is to create a budget by examining your income and expenses to determine exactly how much money you have coming in and how you’re spending it. Once you’ve got a clear understanding of your current budget, the challenge is to find places where you can spend less (or earn more) in order to achieve your financial goals.

Let’s Start By Making a List – Yes, and Checking it Twice!

What do you want and what do you really need?

Evaluate your current financial situation and make two lists — one for needs and one for wants. As you make the list, ask your self which things are important and essential to me? The key to making this work is honesty. Be honest with yourself and dig deep to figure out what is truly essential in your life.

The top 6 most essential items that should be in every budget:

  1. Housing
  2. Utilities
  3. Food
  4. Health Insurance / Healthcare
  5. Personal Items / Clothing
  6. Fun (You have to budget some time for fun and relaxing – be realistic!)

Note: You will probably notice we did not include cell phone or cable on our list. Why? Even though these seem like an essential in today’s world they are not.

When your list is complete, reevaluate what qualifies as a need before making any purchases that will impact your budget.

Set Guidelines

Keep your budget balanced with wants and needs by setting clear guidelines. If you splurge on a vacation, consider cutting other costs that month to offset that large expense. Take a look at this Budget Worksheet to get a sense of how to allocate your money for different expenses.

Track, Trim & Target

Once you start tracking, you may be surprised to find that you spend hundreds of dollars a month on eating out, entertainment or other discretionary expenses. To lower these costs, target areas where you can cut back on spending. Remember that reducing expenses is often a more realistic approach than cutting costs entirely.

Plan For Emergencies – They are going to happen!

The stress of a financial crisis can put a strain on the wealthiest families. Establishing an emergency fund helps you build up savings for unexpected expenses, which are going to happen. No one can avoid emergencies like a health issue, car problems or a major home repair.

Here are some tips for using your budget daily:

    • Watch your spending limits versus your actual spending. If it’s mid-month and you’re already reaching a limit in a certain category, slow down.


    • On the other hand, if you just can’t seem to stay on-budget in a spending category, you may need to adjust the spending limit. Just remember when you do that your total expenses need to be less than your income. So if you increase in one category, you may need to pull back in something else.


  • Make saving money into an expense. It should actually be a fixed expense so you “pay yourself” appropriately every month.

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