How to Create a Budget That Actually Works

Creating a budget is one of the best ways to take control of your finances. However, many people struggle to stick to a budget because it feels too restrictive or unrealistic. The key to success is crafting a budget that is both practical and sustainable. In this guide, we’ll walk you through the steps to create a budget that actually works for you.

Step 1: Understand Your Income

The first step in budgeting is knowing exactly how much money you bring in each month. This includes:

• • Your salary (after taxes)

• • Side hustle earnings

• • Any other regular sources of money

Understanding your total income will help you allocate your spending appropriately. Or do you work a seasonal job and have an irregular income? In that case, check out our quick write up especially on the topic of how to budget on an irregular income.

Step 2: Track Your Expenses

Before setting limits on your spending, you need to know where your money is currently going. Spend at least a month tracking your expenses by:

• • Reviewing bank and credit card statements

• • Using budgeting apps, or what’s better, one of the Expense Tracker spreadsheets that we sell

• • Writing down purchases manually in a journal. If you prefer to type them down, we have great spreadsheet that will help!

Categorize your expenses into fixed (rent, insurance, loans) and variable (groceries, dining out, entertainment) costs.

Step 3: Set Realistic Spending Limits

Now that you have a clear picture of your finances, set spending limits for each category. A popular method is the 50/30/20 rule:

• • 50% on needs (rent, utilities, groceries, transportation)

• • 30% on wants (entertainment, dining, hobbies)

• • 20% on savings and debt repayment

Adjust these percentages based on your priorities and financial goals. We have developed a super easy to use 50/30/20 Budget spreadsheet. What’s even better is that you can customize the percentages if you want to.

Step 4: Prioritize Savings and Debt Repayment

Your budget should always include a portion dedicated to savings and debt payments. Consider:

• • Emergency Fund: Aim for 3–6 months of living expenses.

• • Retirement Savings: Contribute to a 401(k) or IRA, or a RRSP

• • Debt Repayment: Use methods like the snowball (paying smallest debts first) or avalanche (paying highest interest debts first) to get out of debt faster. One of our budgets – the Monthly and Annual Budget by Paycheck has a section you can enter credit card debt and it helps you see the interest rates and other important information to help you decide which debt to pay off first.

Step 5: Plan for Irregular Expenses

Unexpected expenses can throw off your budget. Plan ahead for:

• • Car repairs and maintenance

• • Medical bills

• • Holiday shopping

• • Annual insurance payments

Set aside a small amount each month into a sinking fund to cover these costs when they arise.

Step 6: Adjust and Review Your Budget Regularly

Your financial situation will change over time, so your budget should be flexible. Review it monthly and adjust based on:

• • Changes in income

• • New expenses

• • Progress toward savings goals

If something isn’t working, tweak your plan rather than giving up entirely. This is a big one, because I see so many people giving up on budgeting simply because something didn’t quite work right the first time around.

Step 7: Use Budgeting Tools and Apps

There have been many tools developed to help budgeting be easier. Here are some that people use:

• • YNAB (You Need a Budget) – Great for zero-based budgeting.

• • Mint – Tracks expenses and gives spending insights.

• • PocketGuard – Helps prevent overspending.

• • Simply On Budget spreadsheet – tracks expenses, spending, income; many types of budgets available to suite your needs; a one time purchase and they are forever yours – not a subscription; can be tweaked to suite your needs; highly customizable; available everywhere on your Google drive; very beginner friendly; simple yet very effective; calming peaceful design with useful charts and graphs (but without overdoing it)

Using digital tools can help you stay on track without the hassle of manual tracking. And using Simple On Budget spreadsheets – they will be available everywhere at any time.

Step 8: Give Yourself Some Flexibility

A budget isn’t meant to be a punishment—it’s a tool to give you financial freedom. Allow yourself small treats and adjust as needed so you don’t feel restricted. The more realistic your budget is, the easier it will be to stick to.

Final Thoughts

Budgeting is not about limiting your life; it’s about making your money work for you. By following these steps and staying consistent, you’ll build a financial plan that helps you achieve your goals while still enjoying life. Start today, and take control of your financial future! Try one of our budgets today! Or perhaps you would like to start a custom project with us? Get in touch with us today to discuss your custom spreadsheet!