How To Make A Budget (And Actually Stick To It Every Month)

Joseph Meyer
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First, Let’s Talk Money Management MISTAKES (So You Can Avoid Them)

If you’re one of those people who always have money problems (unexpected car repairs, expensive gifts for birthdays, holidays, etc.), then I have bad news for you: You’re doing it wrong. And that’s because you’re making at least one of these mistakes:

Ignoring Bills

This is the most common “money management” mistake that a lot of people make. The general idea is that if you’re in debt, you should avoid paying them as much as possible … except that reality shows that not paying your bills is a big no-no.

You end up owing more interest, which makes matters worse. And it’s just plain dumb because you can earn interest if you pay bills on time. Furthermore, you avoid penalties for paying late. And there are those you have the option to set up auto pay.

Just be sure to set aside some money to pay bills the moment you get home from work or the moment you receive your paycheck.

Overusing Your Credit Cards

Mistake #1: You haven’t made a budget to begin with.

Just like weight loss, budgeting is a process, and not a one-time event. You can’t magically make a budget tomorrow and expect it to be the right one for a year, a month, or even a week, because your financial situation will be different each month. How much you have to spend depends on what you earn, what you save, what you buy, and yes, even what you eat. And you need a budget that factors in these dynamic variables.

Budgeting doesn’t work without a plan. That means a monthly plan based on these factors. And it needs to be updated regularly. A good budget is more like a one-year road map that you’re not afraid to modify based on the reality of your situation as you go. So you can ignore that budget your parents gave you in high school that was based on a salary they had ten years ago, never updated, and is still based on a four-person family. That’s not a budget; that’s a relic.

Mistake #2: Your budget doesn’t match your personality.

Some people play the roles of plumber, electrician, auto mechanic, and expert gardener, all while being in the military. These folks are savers, not spenders, and they love organizing and tracking their money—using whatever system of accounts works best for them and keeping a close eye on it.

Other people are risk takers, inspired entrepreneurs, and opportunistic investors. These people thrive on constant change, so naturally they want to stay away from finance.

This is where the mistake comes in. Some people think having a budget means there’s no room to have fun or to take risks. The world of finance caused them so much stress that they have a feeling of unease when they even think about taking a peek at their bank statements.

These folks usually don’t keep track of their money at all. They might work hard, but they have no idea how much they are spending. They hate budgets and claim that they will never stick to one.

And they’re right—they won’t stick to one. A budget that you hate and don’t enjoy won’t stay with you for the long haul. The budget-er will always be in trouble, going up and down, with no way to find balance.

Mistake #3: You’re a yo-yo budgeter.

Budgeting is frequently viewed as a chore or burden. Part of the problem is that the budgets we’re taught to create in school and at home tie a dollar amount to a specific date, giving rise to the yoyo-budgeting cycle.

This isn’t realistic, and it often results in impulsive spending and overspending, or creating a budget that’s suddenly taken over by your credit-card bill because you didn’t budget for it.

Because a monthly budget is a short-term planning tool, it’s going to change. That’s why some credit counselors and education professionals think every-other-month budgeting is the way to go.

In my experience, monthly budgets are best for managing spending and creating a left-over contingency fund. You don’t spend more than you have, and you’ve got your financial situation under control.

As for using a budget to eliminate or significantly reduce your debt? It takes longer than a month to get out from under those bills.

Mistake #4: Your Budget Isn’t Flexible (or Realistic)

This is where most people go wrong. They establish a budget that they can’t realistically follow. When their budgeting plan requires them to spend more than they’re capable of (because it’s too rigid or too low), you can be sure they’ll eventually abandon it.

So, how do you create a budget that you can afford to stick to? Start by knowing how much money you have to work with. This is the money you have available for spending each month.

Next, look at your expenses and figure out what you can live without. Financial experts usually recommend keeping your total monthly fixed expenses under 50 percent of your monthly income. Fixed expenses are those you have to pay every month, like rent, utilities, insurance premiums, car payments, mortgage and student loans. When you go to a store, stick to your list and don’t buy anything extra. You’re just saving room in your budget for really important expenses.

Finally, establish savings goals. Create a separate savings category, and once you reach your monthly goal, deposit the money into your savings account. Many people like to do this on payday, which gives them a sense of accomplishment.

Mistake #5: Your Budget Is Imbalanced or Inaccurate

You’ve read through this entire budgeting guide, and it seemed like such a breeze. However, a few weeks later you’re not making the progress that you expected. You’re not making significant cuts to your expenses or you’re not getting your spending under control.

In some cases, a budget is not the source of the problem. An imbalanced budget may be the problem.

An imbalanced budget is one that has proportionally too much or too little money going to certain spending categories. Let’s look at a few examples.

{1}. Too much money going to groceries
{2}. Too much money going to dining out
{3}. Too little money going to saving for retirement

By imbalanced, I’m referring to a level of spending that is not in line with your values. The key here is to determine your values. You’ll spend more on groceries if you choose to eat healthier (no one judges you for eating fast food every once in a while). You may decide that eating out often is a means of socialization that is more significant to you than saving for retirement.

How To Budget For Everyday Life

We all strive to get everything we want while still having enough money left over for the things we need. With a good budget, you can make your dreams a reality.

A budget is basically a guide for how you are going to spend your money. Without a budget, you are sure to overspend and eventually find yourself in financial trouble. It is essential to control your budget to make sure you have enough money for important things that come into your life, like a new home or a car, or even funding a college education.

Creating a budget goes beyond balancing a checkbook. A good budget includes income and expenses. It is also important to create a savings plan so you will have money to spend when you need to, like when you lose your job or have an unexpected medical emergency.

The first step to creating a good budget is to start with a spending plan. If you don’t understand where your hard-earned money goes, then you have no way of knowing where to start cutting back.

The most important thing to do when creating your budget plan is to figure out your average expenses for each month. There are two ways to do this:

First, you can create a spreadsheet that tracks each of your expenses on a monthly basis for the last 12 months. This should include things like rent, utilities, food, utilities, and any other expenses you have on a monthly basis.

Know what you have right now.

Your income, your expenses, and your savings. I liked this bit of advice from the blog Less Waste, More Wealth:

(In regards to saving money), I recommend figuring out your estimated expenses for the month (food, gas, entertainment, etc.) and dividing your monthly income from all sources by your total expenses. This "budget" will give you an average of how much you spend in a typical month. By allocating a certain dollar amount to fun stuff (eating out, movies, travel, a class you want to take), you'll know how much you have left over for groceries, gas, bills, etc.

Although this seems to make sense, I have never found this budgeting method easy to stick to.

Trying to spend less than you have in the moment makes you feel guilty, angry, and resentful, and is not sustainable in the long run because it generates big spikes of stress.

I think what works better for me is: know your long term goals and know your principles of living, and then track what you do. That way, you can get a cognitive sense of whether you are living in accordance with your principles.

From personal experience and from interviews I've read with those who have stuck to budgets, it seems that at some point, most people give up and say to themselves: "I am not going to live my life according to this crappy budget rule."

Review your spending and income.

To create a budget, the first thing you should do is review your spending and income. To do this, make a list of your fixed monthly expenses (like rent, insurance, and utilities) and your variable expenses (those that fluctuate from month to month depending on what you’re spending your money on, such as groceries, entertainment, and personal items). Write down the amounts you spend or anticipate spending on your variable expenses. Then, consider how much of a contribution you should set aside for your savings, and write down the amount you’ll put into savings.

Once you’ve estimated your fixed and variable expenses, consider how much of an allowance you’re going to give yourself for discretionary spending each month. Once you’ve estimated these numbers, you can begin to budget for how much you’re going to spend on each item every month.

Identify your needs and financial goals.

Before you sit down and make your budget, it’s important to take stock of your financial situation. Are you thinking about the next paycheck? The next trip to the mall? The principle of budgeting is simple: divide your income into the expenses necessary to live a comfortable life.

It’s easy to see why it’s important to make a detailed list of everything you need and want. The first step in developing a budget is to make a detailed list of your monthly, quarterly, and annual needs and expenses.

To make this list, ask yourself what is important to you and what you expect from your financial resources. To do this, imagine yourself as a company, one that is responsible for driving growth and achieving income goals.

Figure out all of the things you need to spend your money on. Write down each item, and be sure to include the monthly cost and a description of why it’s necessary for your life. It may help to categorize items into the following categories:

  • Basic living expenses, such as rent, utilities, food, transportation
  • Necessities, such as insurance, credit cards, Internet
  • Entertainment, such as restaurants, clubs
  • Financial goals, such as debt reduction

Start from the top.

After you make a list, make a yearly budget and then a monthly budget so you can figure out exactly how much money you have every month to work with. Take note of all your bills, expenses, savings, and anything else you can think of. Then go over it again and figure out how much you can save for the month. Once you’re done with that, you’re ready to set up your budget.

Make some real changes.

Take a look at where the money is going.

I would start by looking at your rent/mortgage, food expenses (groceries), transportation, and entertainment (see, you are already into entertainment).

If they’re too high then the first thing you should do is cut back on all of them.

Food, entertainment, and transportation are the big 3. Sure, you can cut back on rent, but if you’re doing the bare minimum by living with your parents, you’ll have a very hard time doing that.

Housing can be the main expense of your budget. But that doesn’t mean you should completely ignore it. You can cut back on housing expenses, too!

Rent is the major expenses of your budget, don’t ignore it completely. But like I said, cutting back on housing is not an easy thing to do. Don’t stress too much about that.

Right now you need to pinpoint your “biggest expenses” and that’s where you need to be targeting in terms of cutting expenses.

Food, transportation, and entertainment. These are the areas you should be spending most of your time investigating.

You have to make sacrifices.

Go automatic.

As soon as you get money, it’s tempting to spend it, as opposed to squirreling it away. But if you automatic-transfer your income into a separate bank account, you won’t be tempted.

Use online bill pay. It’s easy to lose track of bills if you do them manually. Online bill-pay services will help you track when bills are due, and they have their own reminders as well.

Check with your bank about online bill pay. Many banks now offer this service for free. Check with yours. If they do not, consider switching to an institution that does offer it.

Create categories.

This is where you actually ask yourself, “What do I need, and how much money is it going to take to make that happen?”

Some ideas for categories include: housing, utilities, auto, insurance, health, recreation, food, gifts, contributions, savings, loan payments, and others.

Don’t forget annual or semi-annual payments.

Be sure to include your insurance premiums or your annual life insurance payment. A lot of people forget to consider those. It is also a good idea to plan ahead for major purchases and stick to your plan.

Don’t forget about any major purchases in the coming six months. They might include or auto maintenance, a new piece of sporting equipment, or a general household item. This could include an appliance purchase where you might be able to get financing.

Also, don’t forget to account for gas.

Also be sure to account for miscellaneous expenses and surprise expenses. All of this might seem overwhelming at first, but once you are used to this process it will become second nature.

Build an emergency fund.

This is the first thing you should do with your next raise. Making a big purchase is easy to justify, but you may regret that purchase a few months later when you don’t have the cash to pay your utility bills or when you have to dip into other savings to pay for something else.

A cash cushion is important to have when unexpected expenses pop up. The easiest way to start building one? Open a high-interest savings account and contribute a portion of every paycheck.

Stick with it.

One of the most common reasons people fail when constructing a budget is because they're half-hearted about it. They're like a gardener who digs a small hole for the plant but doesn't refill the dirt afterwards. (I'm sorry for the gardening metaphors. It's just that I'm really morbidly fascinated with planting season.) So the plant sits and wilts and shrivels and dies because it doesn't have its basic needs met – water, sunlight, and soil.

Budgeting works the same way. People start out excited about how much money they can budget away, and it's great. But the excitement wears off at some point after the first month. That's because it's hard to stick with something when you're not 100% behind it. But you want to make this work – and are determined to!

It's at this point that most people give up. They don't put the work in. They don't resupply the dirt. They don't refill the water. They don't move the plant to where it can get more sunlight. They don't do what's necessary to keep it alive.

Learn the power of “No.”

If you need to save money, it’s not enough to just say that you’re going to. The first step to a successful budget is to make a list of all your monthly expenses and your monthly income, and then figure out what your goals are.

How much do you want to save every month? What do you need to put aside for your annual vacation? If you have student loans, what monthly payments are you committed to making? (However, if you don’t have any debts, it’s important that you start applying that money somewhere, like your retirement fund or to put into savings!)

Once you know how much you can spend and what you want to save for, make sure you don’t get out of control with your budget by checking in with your goals each month. You can even set a reminder on your calendar or a reminder on your phone to check-in. Whatever works best for you.

Allow some fun money.

One of the first steps is to figure out what you spend every month. The simple method is to add all of your expenses together, including the essentials (bills, housing, car payments, gas, groceries, clothing, etc.) and non-essentials. If you don’t have a good idea of what you spend monthly, you can always check your credit card statements from the last month.

Next, you need to decide how to split up the essentials and non-essentials. I recommend that the essentials include 100% of your bills, housing, car payments, food, and gas for your car. This is the stuff that will keep the lights on and food in your belly. Once they are accounted for, you can split up the remaining amount of discretionary spending.

Based on your spending habits from the last month, you may find that you have a bunch of disposable income left over. This allows for some fun money … guilt free spending on whatever you want.

This money can be put into three categories: Relationships, Experiences, and Material Things.

About Climbing Out of Debt…

My name is Robert Murray, and I’m a 29-year-old professional climber/climbing coach living in Salt Lake City, Utah. People ask me all the time how to get started climbing. How do you get into climbing if you live in an area where there just aren’t a lot of climbing gyms and climbing shops? I think climbing is so fun that I couldn’t imagine ever not climbing, so I know how that’s like. I also know how hard it is to break out of a financial rut and live on a tight budget. I’m here to tell you that climbing and paying off debt can both be fun!

Fortunately, climbing can be a cheap, cheap recreational activity, especially if you’re on a tight budget and you’re in a city or town that doesn’t have a lot of climbing gyms. All you need is some climbing shoes, a harness, and a rope and you’re good to go.

If you’re looking for some awesome climbing deals, I’ve posted my favorites on the facebook page for this project. Check it out!

Here are my favorites:

Consolidate or refinance.

Refinancing allows you to consolidate higher-rate debt (like credit cards) with your lower-rate mortgage and create one big monthly payment, with lower overall interest costs.

Pay Yourself First

Placing cash in your retirement fund or spending it will spur a big psychological boost. People historically put off retirement saving until the final years of their careers. Don’t do that.

Create a Monthly Budget

A reasonable structure would be 20% toward not-for-needs, 20% toward savings, and 60% toward essential expenses, like your mortgage payment, insurance, and property tax.

Fix inefficiencies.

Take a good hard look at your expenses to see if you’re wasting money on something not worth it.

Get a 0% APR and Balance Transfer Credit Card.

About 20 years ago, the average credit card had an interest rate between 16.5% and 21.5%, and that was considered a good card. Today, the sky’s the limit. In recent years, credit card interest rates have shot up as high as 28%.

One of the biggest mistakes consumers make today is to not read the fine print on their credit card statements. To make it even more confusing, credit card companies will occasionally change the interest rates on some of their cards. That’s a quick way to ensure you’ll actually pay interest on your purchases.

The sad thing about it is millions of people don’t understand a credit card’s interest rates and can’t find the answers they need on their statements. But if you read the fine print on your statement, and make sure you know what terms your bank is subjecting you to, you can choose whether or not the card is actually a good deal.

In addition to the interest rate stated on your statement, many credit cards offer you a special promotional program during the first few months of use, such as 0% APR and balance transfer offers. Make sure you review these offers very carefully and find out the terms of when the promotional interest rates expire. You should also find out if there are any restrictions on transferring the balance to your new account.

Debt Snowball.

This is the counter-intuitive approach to credit card debt repayments that has revolutionized the debt industry. And it makes total sense to me!

The idea is to pay off your smallest debt first. Then once the smallest is paid off, take that payment and apply it to your next smallest debt. And repeat.

There’s a reason why I prefer the debt snowball method over others and here’s why:


Human nature is such that we place a very high value on the satisfaction of paying off debts (witness the lottery winners and Ryan Reynolds). And we feel immediate gratification when we are successful. So paying off a debt feels really good when you do it.

But it doesn’t stop there!

The snowball effect comes into play when you realize that you have just eliminated one debt and now have extra funds in your budget to help you pay off the next one. Put simply, by paying off debt, you are saving money!

Now I don’t know about you, but I love saving money. And the quicker I can do it, the better.

It’s very easy to apply the snowball method because it only took me 2 minutes to setup and it takes me about the same amount of time each month to update.

Debt Avalanche.

Debt avalanche is a strategy used to pay off debt. It is commonly used by people who have several debts and are looking for a quick way to refinance or payoff their debts within a limited time frame. Debt avalanche refers to paying off the debt with the highest interest rate first, then the second highest interest rate and so on.

This method is ideal for people who can afford the minimum payment. By paying extra towards the highest interest rate debt, you can quickly eliminate it and improve your financial situation.

The debt avalanche method is used by many as a way to gain control of their finances. This method can expedite the process of debt payoff if creditors allow it or you can even use it to negotiate a better interest rate during the refinancing process. It’s important to discuss the debt avalanche with your creditors as some may only agree to lower your rate for a portion of the debt.

Here’s what you do to start the debt avalanche method:

{1}. List all your debts from smallest to largest.
{2}. Pay the minimum on each debt.
{3}. Pay as close to the minimum as you can afford on the smallest debt.
{4}. Pay as much as you can afford on the next largest debt.
{5}. Apply the remainder of your extra pay toward the next debt, and so on.

Curbing Your Spending

Budgets are often seen as unpleasant, boring chores that we all know we should be doing, but for some reason never manage to get around to.

If you feel that way, it’s time to try another approach. Budgets don’t have to be about restriction, limitation or oppression, they can be creative, interesting and empowering.

To get started, you’ll need a pen, paper, an open mind, and a desire to change your financial habits. Be warned, you’ll also need to be willing to confront your spending habits and behaviors that you’ve probably been ignoring for a while.

In this post, we’ll take a look at how to create a really effective budget that will put a stop to your spending. One that will stop you reaching for your credit card every time you feel like you’ve been short-changed, or help you to make the tough choices when you want to buy something you can’t afford.

And we’ll also look at how to use your budget to make a real difference and help you reach those financial goals that have been lingering in your mind for so long.

Here is the link:

Battling Bankruptcy

The budget is the best weapon to fight against bankruptcy and live a frugal life.

With a budget, you know exactly how much money you can afford to spend. This makes it a lot easier to spend less because you’re already aware of the amount you have left to spend. Before you know it, you’ll have a plan of action to make a substantial difference in your finances and life.

All you need to do is come up with an initial budget. This is essential to get your financial situation under control. So if you’ve never made a budget before, now is the perfect time.

The first thing you should do is make a list of all your budget categories. You have to decide how much of your income you’re saving, how much you’re spending on food and eating out, how much you’re spending on shopping and clothes, how much you’re giving to others, how much you’re investing, and so on.

The most important thing to remember is to be realistic with how much you’re spending in each category. You should also review your budget regularly to ensure that your expenses are not increasing.


One way that you can stop yourself from blowing money on non-essentials is by divorcing your money.

You probably make a lot of impulse buys in the store. More than likely, it has something to do with the particular store. When you walk into a place like Target, the sight of cute t-shirts and other impulse buys can be pretty enticing.

What you can do to prevent overspending is to divorce your money from your credit card.

Before you start shopping, access your bank account. Make sure that you have the amount of money available to spend (but don’t spend it until you get to the register).

Once you’re at the register, you will physically hand over your card AND the exact amount of cash for what you want to buy.

When you do this, it helps you resist the triggers in the store because you’re taking all the money out of your bank account. This way, you don’t get the rush of spending money and then regretting it later.


Insurance companies are businesses that need to turn a profit, and one of their ways of doing so is to offer discounts for policies that include discounts. By doing this, insurance companies try to make up for the losses they may have taken on discounts and to turn a profit on the overall policy. By shopping around and shopping the discounts, you will save a substantial amount of money on your health insurance, dental insurance, and car insurance.

Make a list of health and dental providers that you have visited. If you have used any of them for routine care, then call them and ask for a price quote. If you are planning to use a provider that you have not visited before, then make a consultation appointment and then compare the prices at the end of your appointment. You can also call your insurance company and ask for a list of providers in your provider network. Go to more than one provider and ask them for a quote and use the one that is most favorable.

Do the same for your dental insurance. Call your insurance company or your former insurance company and ask for price quotes. If you have not used any dental provider in over one year, then take your kids to a dental clinic and get a price quote for routine cleanings. You can also ask your friends and neighbors for provider prices. This will not only save money on your current dental insurance policy but possibly save you from raising your insurance rates in the future.

Mapping out an Estate Plan

Everyone eventually needs to create a budget. And if you haven’t done so already, it’s a good idea to create a budget early, so you can have committed money available later when you need it.

A budget can be very useful when you have a specific purpose in mind, like buying a car, purchasing a computer, or financing a vacation.

Managing an Inheritance

No matter whether you’ve received a small inheritance or a life-changing sum, it’s natural to wonder what to do with it.

For some, the answer is to make it last as long as possible. That in itself can be a challenge. When you inherit money, you face many of the same financial questions as anyone else.

Tackling Taxes

Like most people, your tax situation is probably more complicated than you think. The government makes it as complicated as possible so that they can save some money on accountants. The thing is, you can’t do your taxes by yourself unless you know the details of each deduction or tax credit. That’s where accountants come in. While it’s tempting to keep a few bucks in your pocket and do your taxes yourself, you will inevitably overlook some important details and end up overpaying in taxes. To save yourself a headache and a few extra bucks, hire an accountant. And by an accountant, I don’t mean a doer-of-small-jobs-who-charges-a-commission-for-getting-rid-of-your-problems accountant.


There are a lot of excellent budgeting tools that make it easy to put together a budget. When you create an account on one of these websites, it will use your bank or credit card account (if you link one) and start tracking your expenses. These apps will then provide you with helpful information about how much money you have left to spend that month and make budgeting a breeze.


Mint is a free web-based and mobile budgeting app that is compatible with all major US banks and credit card companies. There is also an app available for Android and iOS.


PocketGuard is a budgeting tool that is only available for iOS devices through the iTunes app store. It is a very simple and straightforward app. It features categories, a handy calendar view, and a Projects section for all of your long-term saving goals.

WuFoo: Expenses

WuFoo is a budgeting tool that also provides invoicing features. It is a free web-based app that is compatible with all major US banks and credit card companies. There is also an app available for Android and iOS.

Bottom Line

Budgets Vs. Pinning

When you pin items, you start building the habit of spending. Spending money = gaining happiness = you want more.

Budgets = spending less = saving money = positive impact on your life and relationships.

You may be trying to budget but struggling to stick to it. Human beings don’t like to spend less, but rather, we like to spend more. That’s why we have social media, ads, and retail stores – to entice us to spend.

Convince Yourself You Need a Budget

We are all on a budget. Think of food. You are on a budget for food; you just don’t think of it that way. You decide that you want to spend thirty dollars on food for the week. If you spend more than that each week, then your budget is too high. If you don’t spend it all in a week, then your budget has room to grow.

The same thing goes for clothing or any other item. If you don’t have a budget of twenty for clothing, then you will overspend. If you have room in your budget for fifty dollars for clothing, then you can be tempted to spend the whole fifty.