couple budgeting money (Photo: WAYHOME studio/Shutterstock)

How to Create a Budget (And Stick to It!)

By Joni Sweet

Have you ever considered creating a budget? If not, it might be time to start. Whether you’re trying to boost your credit score, save for a major purchase or get out of debt, taking control of your finances is the first step toward hitting your goals. Planning exactly how you will spend (or save!) each dollar you earn takes the stress out of money management.

“Creating a budget is not only about giving you guidelines, though,” said Andrea Woroch, a nationally recognized money-saving expert. “It’s also about figuring out how to spend in more meaningful ways.”

Here are some tips on how to create a budget — and actually stick to it.

Figure out your income and expenses

Creating a budget starts with a firm understanding of your income and expenses. Add up all your income from work, side gigs, child support and any other sources. Then, figure out your take-home pay by subtracting your monthly bills from the total.

“Look at your bills from the last three months, including rent, insurance, utilities, credit card payments and loan payments,” said Woroch.

Most of these expenses will stay the same each month. For bills that change, such as electricity, try to figure out the average monthly cost.

Then, record all of the information in the place that’s easiest for you. While some people prefer to create a budget worksheet in Microsoft Excel, you can also jot it down on paper or create a note in your smartphone.

Track your spending

Bills aren’t the only expenses that belong on your budget. You also need to account for your spending on groceries, gas, clothes, movie tickets, takeout and everything else you might want or need. Since these costs change, track your spending for three to six months to come up with the average.

“Assess everything. Connecting your credit and debit cards to a money management app like Mint can give you a snapshot of your finances and categorize your spending every month,” said Woroch.

You could also make a note of every item you buy in your phone. Don’t forget to include miscellaneous purchases you might make with cash.

Next, sort the purchases and put the average amount you spend on each category in your monthly budget worksheet. Common categories include personal care, entertainment, groceries, dining out, education and child care, but use whatever makes the most sense for your life.

The final expense you need on your budget is savings. Stashing away a small amount every month can keep you from going into debt when an emergency pops up and put you on the path to financial security.

“Treat your savings like one of your most important bills,” said Woroch.

Balance your budget

A balanced budget means that your take-home pay is equal to the total expenses (including your savings deposits) on your budget. Not quite there yet? Then it’s time to take a hard look at where you can cut back.

“Maybe you subscribe to lots of streaming entertainment services and you’re not watching them all, so you decide to cut out a couple,” said Woroch. “Or maybe you realize you’re overbuying food and throwing things out, so you reduce the amount you’re spending at the grocery store.”

You might also notice that some categories are completely imbalanced. For example, maybe you’re only putting away $20 a month in savings, but you spend $200 a month on eating out. Cutting your dining budget could help you boost your emergency fund.

“Creating a budget helps you realize how you might be wasting your money,” said Woroch.

Remember, your budget isn’t about cutting your spending down to only the essentials — it’s about streamlining it so you can buy the things you want, when you want, without worrying that you won’t have enough left for bills. Be realistic about your lifestyle as you finalize your numbers.

“It will be an evolving process. As you become more savvy and realize you can do better, your budget will change,” said Woroch.

You may also need to tweak your budget to include long-term goals. Want to take your family on a big vacation next year? Add the estimated cost to your budget and reduce spending in other categories to make it happen.

Sticking to your budget

Your budget is only as effective as your willingness to follow it. How can you resist the temptation to fall back into your old spending habits?

“Having someone to keep you accountable can be really helpful. If you live with a partner or spouse, or a friend who’s sick of living paycheck to paycheck, do it together and keep each other accountable to your intentions,” said Woroch.

If money’s getting a little tight toward the end of the month, don’t give up. Instead, get creative about making it work.

“Try doing no-spend Wednesdays, where you don’t spend a single dollar,” said Woroch.

Finally, remembering the reasons you created a budget to begin with can help you stay disciplined. Having the funds to pay off debt or put a down payment on a home will feel so much better to you in the long term than buying another pair of shoes right now. Sticking to your budget can make those big dreams become a reality.


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