Creating a Budget

Wondering how to make a budget so your money lasts longer? Read these tips for creating a budget and sticking to it.


By the end of this lesson, you should be able to:

  • Create a budget
  • Take steps to reduce spending

What is a budget?

A budget is a planning tool that helps you keep track of how you spend your money. It includes an estimate of your expenses and the way you expect to pay for them.

A budget is based on your:

  • Income: the money you earn and/or receive
  • Expenses: the money you spend for food, utilities, and other things

Creating a budget

Budgeting helps you spend wisely and save money.

To create a budget:

  1. Print out our Budget Worksheet. If you have limited access to a printer, use a sheet of paper or spreadsheet application such as Microsoft Excel or Google Sheets.
  2. Determine your total monthly income by adding your monthly take-home pay and any other income, such as alimony. (To review adding and multiplying, view our Math tutorials.)
  3. List all of your expenses such as rent or mortgage, car payment, groceries, entertainment, and books. Some of these expenses are the same amount each month, while others vary. For those that vary, try to budget a set amount for each month. Review past bills and receipts to determine an amount you spend each month.
  4. Subtract your expenses from your total monthly income. Use the calculator below to calculate your budget, or use Microsoft's calculator, which can be assessed from the Programs menu. Ideally, your expenses shouldn't exceed your income.
  5. Based on how much money you have left after expenses, decide what percent of your monthly income you want to save each month. It's recommended that you save 10 percent if you can. However, determine the amount that's best for you.

To reach specific financial goals, put a set amount into your savings and/or investments.

A sample budget

Woman working on her budget

Let's look at how Vanessa creates her budget:

chart of Vanessa's monthly expenses

Following a budget

When you are finished, print out your budget and compare what you are spending to the following basic budget guidelines. (See our Decimals and Percents tutorials in our Math section if you need help calculating percents.) Is your spending within the guidelines?

chart of Vanessa's monthly expenses

Your initial budget may change as you learn more about money matters. In the short term, it will get you thinking about how you spend your money.

Be a wise consumer

Being a wise consumer can help you stay within your budget. Here are some cost-cutting tips:

woman paying for an item in a store

Figure out how much you would spend per month if you chose to spend $40 per week dining out. How much money could you actually save per month? To simplify the process, we'll estimate the value based on 4 weeks per month.

If you figured correctly, you got $160 as the answer. That's $1,920 per year!

  • Rich on Any Income, The Easy Budgeting System That Fits Your Checkbook - James P. Christensen, with George D. Durrant, Clint Combs
  • The Family Budget Workbook/Gaining Control of Your Personal Finances - Larry Burkett