When it comes to budgets, most of us have tried to stick to one and failed miserably. Our step-by-step guide on how to make a budget will hopefully help.

You’ve probably noticed that any financial site, book, or professional you’ve ever read or spoken to offers the same piece of advice for anyone looking to get their financial health in order: start a budget.

There’s a reason why you’ve been beaten over the head with this advice—it’s important. But let’s be honest, no matter how many times you’ve been told to stick to a budget, it just doesn’t work out.

It’s time to make a commitment.

The first step is actually knowing how to make a budget. Because in all the budgeting advice you’ve read, no one actually tells you step by step how to do it. We’re going to try to fix that.

First things first, let’s learn why most budgets fail

We’ve all failed on our budget. Maybe your car unexpectedly broke down and you had to pay to get it fixed, or maybe you went out one night and blew through your set spending limit. Hey, it happens.

As David said in his previous post about the subject, budgets fail for two reasons:

  • They lack an accurate record of past spending.
  • They lack well-defined goals that are attainable.

In other words, if you lie on your budget and don’t understand why following one is important, you won’t be able to stick with it.

Keep reading for detailed instructions that will hopefully help you make a budget you’ll actually want to stick to.

Step 1: Decide what kind of budget will work best for you

Luckily, there are hundreds of different budgeting methods. From apps to budget journals to simple spreadsheets—there’s a budget out there for you. Here’s just a few that we’ve talked about in the past:


If you’re relatively financially stable, but still want to manage your money so you don’t end up living over your means, this budget is for you.

It’s simple:

  • 50 percent of your income on living expenses (rent, mortgage, groceries, bills transportation, etc.)
  • 30 percent of your income on wants and lifestyle choices (fun and entertainment, dining out).
  • 20 percent of your income toward debt payments and saving.

The reason I say anyone in a relatively decent financial place will benefit from this budget is because, if you don’t have a steady inflow of cash, this budgeting system is a lot easier said than done.

Any of these categories can change depending on a variety of factors. For example, if you have $100,000 in student loans, a car loan, medical bills, and a couple credit cards, you’ll end up using more than 20 percent of your income to pay off debt.

If you make a low starting salary and live in New York City (or any major city, for the most par) you’ll probably end up spending more than 50 percent of your income on living expenses. You see where this is going.

Traditional spreadsheet

No matter how easy it is to use an app to track your spending, some people need to be actively involved in their budget. Or maybe you just don’t feel entirely comfortable linking your bank information to an app.

That’s why the traditional spreadsheet method might just be the answer. You can either print our spreadsheet, or you can just open up a doc and edit it right in their (everything is added up for you if you do it this way).

Bullet journal

Bullet journals can be used for a variety of reasons, but recently, more and more people are using them to keep track of their finances.

Those who actively participate in their budget, and see it written and drawn out in front of them, might be more apt to stick with it.

With a bullet journal, every time you spend, you should go home and record it. This helps you see exactly where your money is going, rather than budgeting through an app and never actually opening it during the month (which is exactly what I used to do).


Technology can be a big help when you’re getting started with a budget. While there are plenty of budgeting apps out there, there are a couple we prefer.

MoneyPatrol lets you link your bank account to automatically track your spending. That saves you from manually recording every expense. Best of all, MoneyPatrol will alert you when you exceed your budget. Another app worth considering is Personal Capital, which not only monitors your accounts and helps you budget, but it also helps you build an investment portfolio. If you’re thinking about investing, managing your stocks alongside your other finances can be a big benefit.

Step 2: Start tracking your spending

One of the reasons most of us can never stick to a budget is because we like to believe we’re better at controlling our money than we really are. In other words, we underestimate how much we spend.

That’s why the first step is to take a month and see how much you’re really spending.

There are some recurring expenses, like rent, insurance, your internet bill, etc. But it’s budgeting for the unexpected that takes a little more thought. That’s exactly why it’s important to track your spending.

See how little you can actually spend on food and not go crazy eating pasta every night. Figure out what expenses you can cut—can you live without Netflix? With a lower-cost phone place? Can you take public transportation instead of your car? You get the picture.

Step 3: Write your budget

This sounds a lot easier than it is—especially depending on your type of income. Freelancers will have a harder time making a budget because their income can change month to month. That’s not to say it’s impossible to budget as a freelancer—in fact, it’s more important to do so.

Since you took a month to see how much you really spend, you should be in a good place to sit down and write your budget or input the information into an app.

Know your income

If you have a steady income, here’s hows to figure out how much you really make.

  • Are you paid every other week? Multiply your paycheck by 2.166 to determine your monthly pay.
  • Paid weekly? Multiply your check amounts by 4.333.

If you’re budgeting on a variable income, follow these tips. The two basic steps are:

  • Open another savings account for money that covers irregular expenses and put in the same amount each month.
  • Pay yourself every two weeks or monthly if you can… this gives you a somewhat regular income.

Know your expenses

It’s best to overestimate your expenses, that way you have every dollar planned for. Create categories that never change (i.e. rent, gas, food, etc). Also make sure to include savings, eating out, and categories such as car repairs.

If you start preparing for expenses like christmas gifts and car registration now, you won’t have to worry about it later.

Use the same method to pay your bills each month

If you’re in a good financial place and can manage your money responsibly, paying your bills with a reward credit card can help you earn a little extra cash. In case you don’t yet have a rewards card, you’re not alone. Just 55% of credit card holders have a rewards card, and that’s because they usually have high APRs.

But if you’re sure you can pay off your balance in full each month, rewards are a great way to save money. Here’s a list of our favorite rewards cards – pick the one that’s right for you.

Also setting up automatic payments with a credit card (or debit card) can help you make sure you don’t miss a payment.

Step 4: Follow your budget (and make a goal)

Obviously, none of this matters if you don’t actually follow your budget. As a 20-something, it can be hard to stick to a strict budget, but if you don’t, you’ll go broke. It’s as simple as that. Luckily, when you’re young and single, being broke isn’t as bad as when you have to support a family.

As I mentioned above, the reason people have a hard time sticking to a budget is because they have no real goal. Of course, not spending more than you have is an admirable goal, but it’s not always enough.

Are you saving for a house downpayment? A car? Looking to get out of debt? Make sure your goal is important to you. That will help you stick to your budget.

Step 5: Adjust for real life

No matter how good you are at sticking to a budget, if an unexpected expense arises and you don’t have any savings, you’re screwed. There are a few ways to incorporate unexpected expenses or income into your budget.

Our number one piece of advice is to create an emergency fund—a separate savings system you only use for emergencies. If you’re living paycheck to paycheck, that can be hard to do. But if you save something, no matter how small, you’re on the right track. There are some great spare change apps that round up your credit/debit card payments and deposit the extra change in an account for you. While an app like Acorns won’t be enough to create that substantial emergency fund you need, it will definitely augment your savings.

Step 6: Try out as many budgets as you need…just don’t give up

Having a job as a personal finance writer has helped me learn a lot about topics I never thought I’d be well-versed in…but I always felt terrible about how bad I was at budgeting. I tried every app out there, I used spreadsheets—nothing seemed to work.

But a couple months ago, when we published our piece about bullet journaling as a method of budgeting I decided to give it a try, with no real hopes that it would work. I was pleasantly proven wrong.

I’m not the most artistic person in the world, so my journal looks nothing like some of the artsy, well-done versions I’ve seen, but sitting down and recording every expense, using different colored sharpies, somehow makes budgeting more fun.

The point of my story is to demonstrate that there is a budget method out there for almost everybody.

It’s also meant to demonstrate that you’re allowed to change your budget. If you start to earn more (or less) money, adjust your budget. If you get a windfall from your taxes or a holiday bonus, add that to your budget for the next month.


Sticking to a budget is hard, but it’s also one of the single-most important habits to keep if you want to manage your money well.

There’s a budgeting method for everyone—from apps to spreadsheets, and there’s no reason you can’t find a budget that works for you.

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About the author

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Christopher Murray is a professional personal finance and sustainability writer who enjoys writing about everything from budgeting to unique investing options like SRI and cryptocurrency. He also focuses on how sustainability is the best savings tool around. You can find his work on sites like MoneyGeek, Money Under 30, Investor Junkie, MoneyCrashers, and Time. You can find out more about Christopher on his website or via LinkedIn.