How to Create a Budget That Actually Works: A Step-by-Step Guide

Alright, folks, gather 'round! It’s time to dive into one of the most dreaded words in personal finance: budgeting. But before you close this tab and run for the hills, hear me out—this isn’t about turning your life into a series of "no’s" and "can’t-have-that’s." Instead, it’s about putting you in control of your money, so you tell it where to go, rather than wondering where it all went! Ready? Let’s do this—step by step, with a sprinkle of humor to keep things light.

Step 1: Figure Out Your Total Monthly Income

This one’s easy. Grab your calculator (or, let’s be honest, your phone) and start adding up all sources of income. That’s everything coming in—whether it’s your salary, side gig, or even that $5 your grandma insists on sending you every month (hey, every dollar counts!).

Example:

If you make $3,500 from your full-time job and an extra $500 from freelance work, your total monthly income is $4,000. Simple enough, right?

💡 Pro Tip: Make sure you’re using your after-tax income, not the pre-tax number that makes you feel rich for about 10 seconds before reality kicks in.

Step 2: List Your Necessary Expenses

Here’s where things get real. Time to face those non-negotiable expenses—you know, the ones that keep the lights on, a roof over your head, and food in your belly. Be honest and realistic here—don’t forget the "small" things like Netflix or your daily coffee, because they do add up.

Start by listing things like:

• Rent/Mortgage

• Utilities (electricity, water, internet)

• Groceries (and no, "ordering takeout every day" doesn’t count as groceries)

• Insurance (health, car, etc.)

• Transportation (gas, public transit)

Example:

Let’s say your expenses look like this:

• Rent: $1,200

• Groceries: $400

• Utilities: $150

• Transportation: $100

• Insurance: $200

• Netflix (because duh): $15

Your necessary expenses total $2,065. That leaves you with $1,935 from your income.

Step 3: Subtract Expenses from Income

Now that you know your monthly income and necessary expenses, subtract the latter from the former. This will give you what’s left to work with for savings, fun, and goals.

Example:

$4,000 (income) - $2,065 (expenses) = $1,935 left.

Step 4: Allocate Funds for Savings, Fun, and Goals

Here comes the fun part—figuring out what to do with that remaining cash! Spoiler alert: this is where budgeting really works its magic. You get to decide how much goes where. Break it down into three categories:

1. Savings: Building an emergency fund, investing, or saving for a big goal like buying a house.

2. Fun Money: Yes, you can (and should) budget for fun! Go ahead and include that weekend brunch or movie night.

3. Goals: Paying off debt, funding that vacation, or saving for something special.

Example:

You might want to do something like this:

• Savings: $700 (because Future You will thank you)

• Fun Money: $500 (because Present You deserves a little treat)

• Debt Payoff: $735 (because Past You spent a little too much on credit cards)

Step 5: Track Your Spending Regularly

Creating a budget is one thing—sticking to it is another. This is where people often fall off the wagon. But here’s the secret sauce: tracking your spending. Every month, check in to see where your money is going and how it compares to your budget.

You don’t need to get fancy with this. Apps like Mocy (wink) make it easy to track spending, or you can go old school with a notebook and pen. Either way, staying on top of your budget helps you course-correct before things spiral out of control.

Real Talk:

Have you ever checked your bank account and had a heart attack because you thought someone must’ve stolen your money? Yeah, that was probably you—making untracked purchases. Save yourself the drama and keep an eye on your spending.

Step 6: Adjust When Needed

Life happens, and budgets sometimes need to flex. Maybe your car breaks down, or you realize you’ve been underestimating your grocery costs (those organic avocados really add up). The key is to adjust without guilt. Your budget is a living, breathing thing—treat it like one!

Step 7: Leave Room for the Unexpected

Life loves throwing curveballs, doesn’t it? That’s why it’s smart to budget for the unexpected. Have a small buffer for those "Oh no!" moments, like when your phone mysteriously ends up in the toilet (again), or you suddenly need a new pair of shoes after your dog ate the old ones.

Example:

Budgeting an extra $100 a month for the unexpected can save you from stress when things go sideways.

Bonus Step: Remember, Budgeting Isn’t About Restriction—It’s About Control!

Here’s the golden rule: budgeting isn’t about saying “no” to everything fun. It’s about making sure you get to say “yes” to the things that matter most. You’re telling your money where to go, so it’s working for you, not the other way around.

Think of it this way: If budgeting were a movie, you’d be the director, calling the shots. Your money? It’s just the cast, waiting for your cues. When you control the narrative, the story turns out the way you want it to.

Final Thoughts

So there you have it—a simple, step-by-step guide to creating a budget that works. Start with your income, list out your expenses, decide where your remaining money goes, track everything, and adjust as life throws its usual surprises your way. And remember, budgeting is about empowering you to live the life you want—without the "Where did my money go?!" panic attacks.

You’ve got this!