How to Create a Budget That You Will Actually Use

Spending plan, cash flow plan, budget.

I don’t care what you call it.

You need to have a plan for your money.

My husband and I have had a budget every single month since August 2013, and since then, we’ve paid off more than $87,000 of debt on a single, middle class income.

If you’re serious about getting out of debt, the best way to do so quickly is to live on a monthly budget. This is how you will ensure that you’ll spend less than you earn so that you have room to pay extra toward your debt.

You’ll use your budget to allocate your expected income for the month across your various expenses and determine how much extra you can realistically pay toward your debt. Every single dollar will have a home, and you’ll know that you’re being smart with the money that you work so hard to earn.

Remember, you are in control.

You decide the numbers so living on a budget doesn’t mean that you can’t buy organic food or enjoy a nice meal at your favorite restaurant. It means that if or when you do those things, you’re doing so with intention. You’ve planned ahead to make sure that you have the money to cover those expenses.

Here’s a Free Template

To help you get started, I have revised the budget spreadsheet my husband and I use into an easy-to-understand template. In this free download, I have put each month on a separate tab so you can start budgeting any time of the year.

Or, if you prefer the pencil-and-paper method, I have a budget worksheet that starts on page 10 of the workbook in my free guide, Jump Start Your Way Out of Debt. (Instructions for the worksheet are on page 9 of the eBook.)

Once you’ve downloaded the spreadsheet, follow these steps to start budgeting!

1. 1. Go to the current month’s tab, and review the categories and budget items listed. Edit them appropriately to accurately represent your expenses. Reference your Non-Monthly Budget Busters spreadsheet to be sure you don’t miss anything. If you’re using the Debt Snowball method for paying off your debt, then list your debts in the order of your debt snowball.
   2. Enter the payment frequency and due date for each item in the purple column. You’ll find some of this information on your Non-Monthly Budget Busters spreadsheet.
   3. In the yellow column, enter the monthly amount for each item. For the Non-Monthly Budget Busters, enter the payment amount if you plan to pay as they occur or the monthly amount if you plan to save ahead. For items with payments that vary from month to month, such as utilities, I enter the monthly average of what we paid during the last year. For any items that don’t pertain to you, just leave the amount as $0.00.

This column is for a quick reference when preparing your budget each month.

1. 1. Once you’ve updated the first four columns, you can now copy these into the tabs for the other months.
   2. Next, enter your expected net income for the month in the green “Paycheck Total” box under the “Budgeted” column. Add any other income you expect to receive in the green box labeled “Other Income.” The spreadsheet will add the two income amounts together to calculate your total expected income for the month.
   3. Then, reference your monthly payment amounts in the yellow column and enter the fixed payment amounts for the month in the green column. Examples would be your mortgage, cable, and Internet.
   4. Next, enter your goal amounts for the other non-debt items (like food and gas) in the green column. You’ll be creating a new budget for each month so think about what numbers are realistic for this month. Perhaps you found while tracking your spending that you spend $700 each month on groceries. Maybe this month you want to try to pare that down a bit, but you still want to be realistic, so you enter $650.

Don’t forget to include your monthly savings amount for gifts from your Gift Budget.

The spreadsheet will automatically calculate the total amount for each category in the “Category Total” column.

1. Now it’s time to enter your debt payment amounts. Assuming that you’re using the Debt Snowball method, enter the minimum payment amounts for all of the debts with the exception of the smallest debt. The spreadsheet will automatically total everything that you have entered in the budgeted column in the “Total Expenditures” field at the top. It automatically subtracts this amount from your total expected income for the month and provides you with the remaining “Amount to Allocate. “The difference between your total expected income and your total budgeted expenditures is what you can put toward your smallest debt for your debt snowball. If you have a negative number in the “Difference” field, then you’ll need to adjust some of your budgeted numbers in order to work your plan and pay off your debt. Enter this number as your debt payment for your smallest debt, and the “Amount to Allocate” field should recalculate to be “$0.00.”Now you have a balanced budget where your income equals your expenditures! Every dollar has a home!
2. As you go through the month, track your actual income and spending amounts in the blue column. The spreadsheet will automatically total each category and provide you with the difference between your budgeted amounts and your actual amounts in the “Under/Over Amount” column. This will make it easy to review and determine which categories you were under budget for the month and which categories you went over. Use this information when planning your future monthly budgets.
3. At the end of the month, the difference between your Actual Total Income and your Actual Total Expenditures should either be put toward your debt snowball or entered as savings so that the “Amount to Allocate” field equals “$0.00.”

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Follow this process each month, and you’re sure to see progress toward your goals.

If you’re new to budgeting, don’t expect to do it perfectly right from the start.

My husband and I have been budgeting for almost two years, and as shown in our monthly Debt Freedom Progress Reports, we have never had a perfect budget.

But we stick with it, and we continue to make progress toward our financial goals.

And that’s all that matters.

We know we’re moving in the right direction, and we want that for you too!

Next week, we’ll take a look at some methods for finding more money to put towards reaching your financial goals.

What About You?

Participate in the conversation. Do you have a monthly budget? If not, what has kept you from getting started with budgeting? Share in the comments below.