How to Create a Budget | Mama & Money (2024)

If you’re like me, you probably didn’t grow up knowing how to create a budget.

The unfortunate reality is that many of us weren’t taught how to manage money, let alone how to create a budget to do so.

Though it’s gotten a bad rep, a budget isn’t a trap. In fact, I like to say that a budget is a tool and not a trap.

In fact, it is the single most important tool for your personal finances. It allows you to plan your money and give every penny a purpose.

No matter what your income is, you need a budget. Without it, you’ll end up wondering where your money went and why you can’t seem to save.

Creating a budget isn’t as hard as it may seem. In fact, I’ve broken it down into four very easy steps for you to follow.

How to Create A Budget for Beginners

If you’re completely new to budgeting, I suggest that you learn how to budget using pen and paper first before jumping into fancy budgeting apps or excel sheets.

Once you’ve learned the basics, I suggest checking out my step-by-step guide for creating a budget in excel.

So, for these guides, you’ll need to grab your supplies before you get started.

1. List your income

Your income will be the topmost line on your budget.

This includes everything from your 9 to 5 job and any side hustle that you may have.

First, list the name of these income sources in one column and the expected amounts in the column beside it.

Leave space for another column called ‘Actuals’. You’ll put the actual amount that you receive from each income source in this column.

Next, add a column titled ‘Difference.’ This column is to calculate the difference between what you expected to receive and what you actually earned in income.

Lastly, total up your expected income column. This is the amount of money that you have to budget with for the pay period.

2. List your Expenses

You’ll want to list your expenses right underneath the income portion of your budget.

I’ve made this part easy by creating a list of over 90+ common household expenses. You don’t have to get this granular.

Instead, you can choose to budget in categories or percentages. For the sake of this example, I’ll use general categories.

You’ll go through the same exercise of listing out your expected and actual amounts and differences. Remember, the actual amount will be added when the expense is incurred.

If you’re not sure what to expect, take an average of the last three months for each category or expense.

3. Compare expenses to your total income

Your next step is to compare your net income— income after taxes, healthcare, and other expenses taken out of your paycheck— to the total expenses that you expect to incur that month or pay period.

For many people, the expenses will be greater than their income. This is an indication that you’re spending above your means and need to find ways to cut your monthly expenses.

However, if you find that your income is greater than your expenses, you should either put that money toward paying off debt or saving more.

Some common expenses that can be reduced or eliminated include:

• Cable
• Eating out
• Nail and hair appointments
• Groceries
• Gym membership
• Subscription services

The goal is to get your total monthly expenses well below your monthly income. The more that you’re able to reduce or eliminate, the better. That is the definition of living beneath your means.

4. Document each purchase or payment that you make

Now that you’ve established your budget, you must keep track of your expenses in the actual column.

Each time you make a payment or purchase, document down how much you’ve spent in your actual column.

Though I suggest doing this manually as a way to ensure that you’re constantly looking at your budget, there are sites like Mint.com that will do the hard work for you.

You just have to connect your bank account to the app, set up your budget and it will automatically keep track of your expenses for each category.

Tips for Budgeting

Ultimately, your budget should be a guide to your spending.

It doesn’t do the work for you. Saying that budgeting doesn’t work for you really means that you aren’t disciplined around sticking to your plan.

I recommend doing your budget before each pay period. Though monthly works well, things can change throughout the week and you want to be able to make adjustments where necessary.

I find that the best way to do that is to review upcoming events during that pay period and allocate money toward it in the budget before you get paid.

I suggest having your calendar nearby when budgeting so that you don’t miss any upcoming events.

Final thoughts on creating a budget

Those are my 4 easy steps to creating a budget. You should know exactly how to create a budget.

Don’t make it more complicated than it needs to be. In fact, I’ve already done the hard work for you.

Right now, you can grab my FREE monthly budget printable template! This template will allow you to budget and track your expenses.

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