How To Create A Budget

It can be hard to stick to a budget—especially when you’re a mom and budgeting for your family.

That’s what I’m here for.

I’m a money coach and expert.

I’ve paid off $206k in student loan debt (from undergrad and Law School), became a Certified Financial Planner, and built a half a million dollar business while building and budgeting for my family.

I know a thing or two about money, and I want to help you get started budgeting.

I’m going to walk you through exactly how to create a budget so you’re successful.

How To Create A Budget

Grab a spreadsheet (I use Excell) or a notepad to get started. Nothing fancy required. Just somewhere to input or write information.

And with that, let’s get started.

Step 1: Calculate your monthly income

To create a budget, first, calculate your income.

List all of your income in your budgeting tool (whether that’s at the top of a page or in an excel spreadsheet. This step is really important. Don’t leave anything out (like rental income or extra income from a side job). Include all sources of income.

Your income is what you’ll subtract your expenses from.

For a lot of people, this is simply the money they take home from their salary. But if you are a business owner or if you have additional income from a side hustle, you will want to include all of your income on your budget. Try your best to estimate what your monthly income will be for this month. If your income is inconsistent, take the average of the last three months income and use that as your income.

Here’s an example.

At the top of the budget list your income, line by line:

1. Income

  • Take home pay from job: $4,000
  • Babysitting income: $500
  • Blog income: $400

Step 2: Add up your fixed monthly expenses

Next, you need to list out all your monthly expenses.

To do this, start by listing your fixed expenses (also known as non-discretionary expenses). Your non-discretionary expenses are expenses that you must pay. Include debts in your non-discretionary expenses, too. Examples include your rent/mortgage, gas, water bill, groceries, car payment, and student loans (think monthly bills and living expenses that are absolutely due during the month).

If you’re not sure what your expenses are since you haven’t budgeted before, go into your accounts online from the past 1-3 months and use the average number for each expense category. Depending on how messy your finances are, this task may seem daunting. But it’s really important to use as close to exact numbers as you can because it’ll make your budget as accurate as possible.

Going on with the example from above, your expenses should be listed out, line by line, like this:

2. Expenses

  • Rent or Mortgage: $1,000
  • Electric Bill: $25
  • Gas Bill: $20
  • Groceries: $350
  • Kid’s Expenses: Varies
  • Student loan payment: $MyFirstBornChild 😉
  • {Fill in the blanks will all your mandatory expenses}

It’s better to be more inclusive when you’re getting started. Break out every line item as an expense in your budget. You can always combine later. This will help you stay on track more easily.

Once you have your fixed expenses listed out, I want you to stop and move on to step 3.


Step 3: Set financial goals

Before you add anything extra to your budget (like entertainment), I want you to pause and take an extra step of setting financial goals.

The reason this is important is that it will give you a plan and help you prioritize what’s important to you, instead of just going about your normal day-to-day spending.

So, write out your financial goals (learn how to set goals here). If you haven’t written out goals before, a good place to start is by looking at the vision you have for your financial life. Do you want to be financially successful? Do you want to have wealth? Do you want to be debt free? Think about what you want in the ideal situation and think about where you are right now. Then, determine your personal financial goals that you want to set for the short-term (i.e. under a year) that you’ll include in your monthly budget.

Examples of financial goals:
– Get out of debt
– Build a 3-6 month emergency fund
– Fully fund a retirement account
– Save for a down payment on a house

Think about what you want for your financial life. Write down your financial goals.

After you’ve written out your financial goals, begin to think about them as “expenses” and enter them into your budget. By thinking of your financial goals as expenses, you’ll pay them monthly. This will get you in the habit of saving for your financial goals, which is necessary for success.

Adding to the example above, it would look like this…

2. Expenses

  • Rent: $1,000
  • Electric Bill: $25
  • Gas Bill: $20
  • Groceries: $350
  • Student loan payment: $MyFirstBornChild 😉
  • {Fill in the blanks will all your mandatory expenses}
  • Emergency fund savings: $300
  • Car Savings: $200
  • Debt repayment: $400

Note that these are treated as “expenses” even though you wouldn’t normally think of your savings as an expense. For your budget, I want you to do just that.

A good thing to remember is that a budget is strictly made up of income and expenses — it’s only looking at your cash flow. So, if you’re not sure where to put something, it’s probably an expense if it’s money going out of your pocket.

Related: Why Your Brain Needs A Goal

Step 4: Determine your discretionary expenses

Now, you can add in the extra stuff for your discretionary expenses.

It’s third on the priority list (after mandatory expenses and financial goals).

Your discretionary expenses are expenses that you currently pay for, but that are not essential. Examples of discretionary expenses include entertainment, dining out, gifts, vacations, personal care, and clothes. These are costs that can be adjusted based on what you can afford. Notice that they come after your fixed expenses and financial goals. It’s important to prioritize your financial health over unnecessary things, such as entertainment and vacations.

Building off the example above, your expenses would now look like this…

2. Expenses

  • Rent: $1,000
  • Electric: $25
  • Gas: $20
  • Groceries: $350
  • {Fill in the blanks will all your mandatory expenses}
  • Student loan payment: $MyFirstBornChild 😉
  • Emergency fund savings: $300
  • Car Savings: $200
  • Debt repayment: $400
  • Dining out: $75
  • Hair and Beauty: $50
  • Other: $150

Now, you’re done with collecting data. You can move on to the fun part…


Step 5: Subtract your income from expenses

Now, subtract your expenses from your income.

If you get a positive number, this means you make more money than you spend (woohoo). Now, you can go back to your budget and adjust your numbers if you need to. For example, maybe you have a surplus of several hundred dollars. You could put more into savings or put more toward your debt pay off. You want to give every dollar a mission in your budget, so you’re completely planning out what each and every dollar is for.

If you break even, this means you have exactly enough money, but no margin. You may want to adjust your budget to give yourself some margin in the form of a “discretionary” category in the event that things come up that you didn’t plan for.

If you get a negative number, this means you’re spending more money than you take home (not good). If your number is negative, adjust your budget by decreasing some of your discretionary expenses or find a way to increase your income. A way to decrease your discretionary expenses is to spend less on entertainment, dining out, or other non-essential things. Make sure your financial goals are being met before spending on discretionary items. For example, it’s an unwise financial choice to go on a vacation if you don’t have an emergency fund.

Whatever your number, there is power in knowing. It’s the first step toward planning your financial future.

You’ve now basically done the hard stuff. All you have left is monitoring and adjusting things.

Step 6: Implement, monitor, and adjust your budget

Finally, you need to implement, monitor, and adjust your budget according to how your life plays out.

I recommend scheduling a “budgeting meeting” with your family to talk about your budget regularly. I do a financial meeting weekly, which works because it’s often enough that I check in and re-tabulate how it’s going, but not too often that it becomes a daily task. I set aside an hour Saturday morning to look at my accounts and make any changes to my budget. This is a great time to go over your budget if you’re doing it with a significant other, as well. The important point is to check in regularly. This will help you implement your plan and stay on track.

As you monitor your budget, reflect on the process, and make changes as needed, keep going and let your budget be the system that helps you achieve financial success.

A Final Note!

The first couple of months of budgeting can be rough. Just know that nothing has gone wrong. This is totally okay!

If you stick with it, you’ll be successful (and it will be worth it).

Up Next: Take the free class—How To Become More Mindful With Money In Marriage.