• Anne

Create a Budget

Updated: Mar 18, 2020

Do you carefully manage and maintain a budget?

It is shocking how many people don't pay attention to their money. They don't keep track of what they're spending, don’t know where their money is going, and don’t know how they're going to pay future bills. They don't have a plan.

For sure, life doesn't go according to plan, but not having a plan is a surefire way to drown. Especially with finances, you must have a plan.

The danger of not having a budget

If you leave money unattended, it will do what it pleases and you will spend most of your time without it. As Dave Ramsey says, “A budget is telling your money where to go instead of wondering where it went.”

When you have a budget, it gives every dollar a job and puts every dollar exactly where it should be. Then you stop worrying about where your money went and you start seeing what you can do with it. That’s when you start building wealth.

Too many people only check their bank account and see that they still have money, so they buy whatever they want. Then when they check their bank account and there's no money, they just buy whatever they want on a credit card. That makes them slaves to debt. Even if you're not in debt, you hinder your own progress when you're unable to grow real wealth.

You need to sit down together and decide your budget

You can use Dave Ramsey’s Every Dollar Budgeting App (it’s free). Personal Capital also has basic budgeting features. If you're married, you need to make this a joint effort. If you're not married, you don't have to combine finances with a significant other. However, I believe married couples should share finances. This takes a lot of trust though, so you should both be responsible and open with your finances.

When you say that you won't spend outside this given budget, you promise your spouse that you won't do it. Discuss every big financial decision together. If you haven’t, sit down with your spouse (if you have one) and write a budget.

Take your income and assign every dollar to a category. You mustn't pull from the grocery fund when you want a new pair of shoes or when a new movie comes out. You must keep to the given categories. You can adjust the budget, if necessary, but take special care in making sure that you are controlling your money and your money isn't controlling you. That is what budget does; it puts a leash on your money.

The best budget is one you can stick to

A budget is only effective if you do it. You have to stick to the budget! A budget has absolutely no value if you don't use it. There are so many different ways to budget. Find something that you can force yourself to do and stick to it!

My mom always said the best exercise plan is the one that you will actually do. It doesn't matter if you have plans to power lift and run a marathon if you never get off the couch. But if you can make yourself jog for five minutes every day or do ten minutes of yoga every day, then that's a good exercise plan.

Whatever you have the willpower to maintain and stick with is what you should do. Some people, like me, have a ton of categories and want to make sure that every single dollar is in its exact right place; I don’t mind the extra work that takes. Some people like larger categories where they can have flexibility, because they can’t make themselves watch every single penny. That is fine. You can adjust and adapt.

There is no one size fits all

There is no “correct” budget. You have to experiment and play with it and see what works best for you. I know I've adjusted my budget a lot over the years and have made it more and more compatible with my husband’s and my style. The budget is there to help you control your money and corral it so that you can be where you want to be in the future. Sit down with your spouse and discuss your goals for the future. That will help you make a plan.

For instance, my husband and I want to buy a house. Thus we have sat down, multiple times, and looked at where we are on our path to that goal. We make new plans for saving. We try to find ways that we can increase that savings rate. We have a budget that we stick to and we chart our progress towards that goal. For added motivation, I regularly update him on our progress towards that goal.

Having a goal is really helpful in motivating yourself to keep to a budget. Motivation is very difficult when you don't have a higher purpose. I am a very low spender because I want to save money so that I can have the financial independence I want.

Many people don't think about that. They get their $5 coffee every morning they get their $10 lunch every day, because they have that money in their bank account, but they don't think about the bigger picture. They don't realize that they're spending nearly $4,000 annually on those two items, and they don't think about how much that $4,000 could make with compound interest.

That's what motivates me. Wherever I see a co worker buying lunch, that I know that I could technically afford, if I wanted to (but it's outside of my budget), I remind myself that I have a higher purpose. They're getting a meal, but I'm going to get financial freedom.

I once wanted to buy a smoothie for a little under $10, and I sat there holding the $10 bill in my hand for a few minutes and considered if I was willing to give up that $10, which could grow into $56 in 20 years. That time, I did end up getting the smoothie, but that kind of perspective really helps you think twice about spending money.

Another good motivation is if you know your net worth. Watching your net worth increase is such a good feeling. It gives you a lot of motivation and drive to move forward. I get very excited to see my net worth increase, and I make goals to increase it and see if I can accelerate my growth.

My categories

These are the categories that I use in my budget. Again, one size doesn't fit all, as I have different things that I'm saving for and different priorities than you probably have. There are generally three major categories: Needs, Wants, and Future. I've heard a lot of people recommend the 50-30-20 rule where you put 50% of your paycheck towards needs, 30% towards wants, and 20% towards future. I currently I put about 40% of my income towards the future, 50% towards needs, and 10% towards wants. My future is what I want, so my husband and I have managed a pretty high savings rate.


  • House savings (Down payment for future house)

  • Car savings (Buying the next car we’ll need down the road)

  • Emergency fund (3-6 months worth of expenses)

  • Education (College funds/academics for kids)

  • Home Improvement (Repairs and improvements for the future house)

  • Random fees (Surprise expenses that don’t fall into a category)

  • Investments (The place I withdraw money for investments)

  • Job training (In case more training or tools are needed for a job)


  • Health (Medical expenses/supplies)

  • Housing (Rent and utilities)

  • Transportation (Car expenses and gas)

  • Insurance (All insurance)

  • Groceries (Whatever I get from the store each week)


  • Electronics (Phone bill and saving for new devices when ours break)

  • Clothing (When we need it)

  • Expensive wants (Things we can’t justify pulling from other budgets)

  • Vacations (Saving for fun outings)

  • Hobbies (Supplies or lessons for hobbies - this is where CreativityBeforeConsumption.com was funded)

  • Books/Movies (Buying books or movies)

  • Presents (Only to be touched when giving to someone else)

  • Dates (For our weekly date night - mostly a cash fund)

  • Epsilon (Our spending money - mostly a cash fund)

This works best for me.

Dave Ramsey has a suggested percentage allocation for a budget. These categories are a little more simple than mine, so it might work better for you. I integrated those into my sample budget.

For people looking for simplicity, my grandpa told me you can narrow the budget down to four categories:

  • Emergency fund (for rainy days)

  • Fixed expenses (like insurance, rent, bills, etc.)

  • Variables (more adjustable spending)

  • Future large expenses (HVAC, carpets, roofing, etc.)

Again, whatever works best for you is what you should do.


I am not a financial advisor. These are my opinions and my experiences. So please be wise and make your own decisions.


If you do not have a written budget, make one, as soon as possible. This will save you. If you have issues with money or even if you don't have issues with money, a budget will help. Even if you do have a budget, are you keeping to it as much as you should? If not, make a resolve to actually keep to your budget or adjust your budget, so that it is something you can keep. If you do keep a budget, and you're doing that properly, try to see what more you can do. Think about your goals and think about what you can do to achieve them more quickly.

If you need help, I have a free sample budget template for you. It is based off the same spreadsheet I use for my budget (with fewer categories and with made up numbers). It lets you set goals/boundaries for each budget so that you don't put too much cash in each one and also so you can try to keep above a certain threshold. You can also write your net worth every time you budget and keep track of how much you are spending, saving, and investing each year. Please feel free to contact me if you have any questions about how to use the spreadsheet!


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