How to Make a Budget That You Will Stick to This 2023! (Proven Way!)

How to make a budget? Creating a personal budget can be a daunting task, but it is one of the most important steps you can take towards achieving your financial goals. Having a budget allows you to take control of your money and make sure that you are using it in a way that aligns with your priorities. In this post, we’ll walk through the steps of creating a budget, from assessing your income to sticking to your budget over time. If you still find it challenging in creating your own personal budget, join our Master your Cash Flow Challenge to develop the necessary tools and strategies you need to start controlling your finances.

How to Make a Budget -Assessing Your Income

The first step on how to make a budget is to determine your total monthly income. This includes your salary, any bonuses, and any other sources of income such as rental income or freelance work. If you have irregular or variable income, it can be helpful to estimate your income by looking at your average income over the past few months.

How to Determine Your Income: Step-by-Step

Determining your total monthly income is the first step in creating a personal budget. Here is a step-by-step guide on how to determine your total monthly income:

Step 1: Gather all of your income sources.

This includes your salary, any bonuses, rental income, freelance income, and any other sources of income.

Step 2: Calculate your net income.

This is your total income minus any taxes and deductions, such as social security and Medicare. You can find this information on your pay stub or by contacting your employer.

Step 3: Add up all of your income sources.

If you have multiple jobs or sources of income, make sure to add them all together to get your total monthly income.

Step 4: Estimate your income for irregular or variable income.

Tips for estimating irregular or variable income

Estimating irregular or variable income can be challenging, but there are a few tips that can help:

Track your income

Keep track of your income over the past few months to see if there are any patterns or trends. For example, if you are a freelance worker, you may have more work during certain months of the year.

Average your income

Take an average of your income over the past few months to get a rough estimate of what your income will be in the future. This can help you to budget for the months when your income may be lower.

Look for consistency

Identify the most consistent income streams, those that happen at a regular interval, such as a salary, and allocate them as fixed income in your budget.

Be realistic

Make sure to be realistic when estimating your income. It’s better to underestimate your income and have some extra money at the end of the month than to overestimate and be short on cash.

Be prepared for unexpected changes

Keep in mind that your income may change unexpectedly, so it’s important to have a plan in place for dealing with unexpected changes in income, such as an emergency fund.

If you have income that varies from month to month, such as freelance work or commission-based sales, take an average of your income over the past few months to get a rough estimate of what your income will be in the future.

Identifying Your Expenses

Once you know how much income you have, the next step is to identify your expenses: variable and fixed expenses. This includes all of the money you spend each month, including housing, transportation, food, entertainment, and any other categories that are relevant to your lifestyle. One of the best ways to track your expenses is to use a budgeting app or spreadsheet, which will allow you to see where your money is going and identify areas where you may be able to reduce expenses.

How to track your expenses

Step 1: Gather all of your bills and receipts.

This includes bills for rent, utilities, credit card statements, and any other monthly expenses you have incurred.

Step 2: Create categories for your expenses.

Common categories include housing, transportation, food, entertainment, and miscellaneous expenses. A good rule of thumb is to have a maximum of 10 categories. It gets hard to track expenses if you have more than 10 categories.

Step 3: Record your expenses.

You can use a spreadsheet, a budgeting app, or a pen and paper to record your expenses. Make sure to include the date, the amount, and the category for each expense.

Step 4: Track your expenses on a regular basis.

It’s important to track your expenses on a regular basis, such as daily or weekly, to get an accurate picture of where your money is going.

Step 5: Review and adjust.

Once you have tracked your expenses for a few weeks or months, review your spending and adjust your budget as needed.

Step 6: Track your variable expenses.

Estimate the variable expenses and keep track of them, like food, entertainment, etc.

Step 7: Identify your expenses patterns.

Look for patterns in your spending, such as regular subscriptions or recurring expenses. It could also be eating out habits as well as leisure activities that you do regularly.

Step 8: Compare your spending to your budget.

Compare your actual spending to your budget to see if you are staying within your budget or if you need to make adjustments.

By tracking your expenses regularly, you can get a better handle on where your money is going and create a budget that works for you.

Categories of expenses to consider

When creating a budget, it’s important to consider all of your monthly spending and divide them into appropriate categories. Here are some common categories of where you usually spend money to consider:

1. Housing: This includes expenses such as rent or mortgage payments, property taxes, and home insurance.
2. Transportation: This includes expenses such as car payments, fuel, insurance, public transportation, and parking fees.
3. Food: This includes expenses for groceries, eating out, and other food-related expenses.
4. Utilities: This includes expenses such as electricity, gas, water, and internet.
5. Insurance: This includes expenses such as health insurance, life insurance, and disability insurance.
6. Medical and healthcare: This includes expenses such as doctor visits, prescription drugs, and medical equipment.
7. Entertainment: This includes expenses such as movies, concerts, and other leisure activities.
8. Personal care: This includes expenses such as grooming, clothing and personal expenses.
9. Debt payments: This debt repayment includes expenses such as credit card payments, student loan payments, and other debts.
10. Savings and investments: This includes expenses such as retirement savings, emergency funds and other investments.
11. Taxes: This includes expenses such as state and federal taxes, and any other taxes that you may have to pay.
12. Travel: This includes expenses such as airfare, hotel, car rental, and other travel-related expenses.

It’s important to note that these categories may vary depending on your lifestyle, location, and personal financial situation.

My Favorite Budget Apps in 2023

Budgetbaker’s Wallet

1. Easy to use: Budgetbaker’s Wallet is user-friendly and easy to navigate, making it simple for users to create and manage their budgets.
2. Customizable: The app allows users to create their own categories and set custom budgets for each category, making it easy to tailor the budget to their specific needs and financial situation.
3. Real-time tracking: The app allows users to track their expenses and income in real-time, making it easy to stay on top of their spending and budget.
4. Reports and Graphs: The app provides detailed reports and graphs that allow users to visualise their income and expenses. This can help users to identify patterns and trends in their spending and make more informed financial decisions.
5. Multi-device and Multi-Platform: The app is available on multiple devices and platforms, including iOS, Android and web, this allows users to access their budget from anywhere, at any time.
6. Collaboration: The app allows users to share their budgets with their partner, family, or friends, making it easy to manage shared expenses and stay on top of their finances as a team.
7. Automated transactions: With the app, you can automate your transactions and set reminders for payments, bills and deadlines, this helps you to stay on top of your bills and avoid late fees.
8. Secure: The app uses the latest security protocols to protect your data, you can rest assured that your financial information is safe and secure.

Bluecoins – My Personal Favorite of All Time (I’ve been using this for the past 5 years)

1. Customizable categories: Bluecoins allows users to create their own categories for expenses and income, making it easy to tailor the app to their specific financial situation.
2. Multiple account support: The app allows users to track multiple bank accounts, credit cards, and cash transactions in one place, making it easy to get a comprehensive view of their finances.
3. Budgeting tools: Bluecoins provides users with detailed budgeting tools that allow them to set and track budgets for different categories of expenses.
4. Reports and Graphs: The app provides detailed reports and graphs that allow users to visualise their income and expenses. This can help users to identify patterns and trends in their spending and make more informed financial decisions.
5. Automatic Transactions: The app automatically categorizes and records transactions, making it easy to track expenses.
6. Multi-Device and Multi-Platform: The app is available on multiple devices and platforms, including iOS, Android, and web, which allows users to access their budget from anywhere, at any time.
7. Secure: The app uses the latest security protocols to protect your data, you can rest assured that your financial information is safe and secure.
8. Customizable Reports: With Bluecoins, you can customize your reports and choose the information you want to see, this allows you to have a better understanding of your finances.
9. Encryption: Bluecoins uses encryption to protect your data, this ensures that your information is safe and secure
10. Multi-currency support: The app supports multiple currencies, making it easy to track expenses and income in different countries.

Tips for reducing expenses

1. Create a budget: One of the most effective ways to reduce expenses is to create a budget and stick to it. A budget will help you to identify where your money is going and where you can cut back.
2. Track your expenses: Keeping track of your expenses is an important step in understanding where your money is going. There are many budgeting apps and tools available that can help you track your expenses easily.
3. Cut back on unnecessary subscriptions and memberships: Review your subscription and membership services, such as streaming services or gym memberships, and cancel any that you don’t use or need.
4. Cook at home: Eating out can be expensive, so try cooking at home as much as possible. This will save you money and can also be healthier.
5. Shop for deals: When you do need to buy something, make sure to shop around for the best deals. Compare prices online and at different stores, and take advantage of sales and discounts.
6. Use cash: Use cash instead of credit cards for small purchases. This will help you stay within your budget and avoid overspending.
7. Avoid impulse buys: Impulse buys can add up quickly, so try to avoid them as much as possible. Before making a purchase, ask yourself if you really need the item and if it fits within your budget.
8. Reduce your utility bills: Look for ways to reduce your utility bills, such as turning off lights when you leave a room or unplugging appliances when they’re not in use.
9. Use public transportation or carpool: Using public transportation or carpooling can save you money on gas and car maintenance.
10. Make a plan for unexpected expenses: Unexpected expenses can be difficult to budget for, so make a plan for how you will handle them when they do occur.

Creating Your Budget

With your income and expenses in hand, you can now create your household budget. This monthly budget involves allocating your income to different expenses, based on your priorities and goals. For example, if you want to save money for a down payment on a house, you’ll want to make sure that you are allocating a significant portion of your income to savings.

How to use a budgeting tool or budget spreadsheet

If you like using an app on your phone, you can try my suggestions earlier: Wallet by BudgetBakers or Bluecoins. If you are a spreadsheet person, you can follow these steps:

1. Set up a spreadsheet: To start using a budgeting tool or spreadsheet, you will need to set up a spreadsheet with categories for your income and expenses. You can use a pre-made template or create your own.
2. Enter your income: In the income section of your spreadsheet, enter all of your sources of income, including your salary, bonuses, and any other forms of income. Make sure to include both your regular and irregular income.
3. Track your expenses: In the expenses section, create categories for all of your regular expenses, such as rent, utilities, and groceries. You can also include categories for irregular or variable expenses, such as vacation or holiday spending.
4. Enter your expenses: Once you have created your categories, enter all of your expenses for the month. Be sure to include all of your fixed and variable expenses.
5. Use formulas to calculate totals: Use formulas in your spreadsheet to calculate the total of your income and expenses. This will give you a clear picture of your financial situation.
6. Set up a budget: Once you have your income and expenses entered, set up a budget by allocating money to different categories.
7. Track your progress: Use your spreadsheet to track your progress throughout the month. Compare your actual expenses to your budgeted amount, and make adjustments as needed.
8. Use charts and graphs: Charts and graphs can help you visualize your spending and income patterns. This can help you identify areas where you may be overspending, and make adjustments accordingly.
9. Customize it to your needs: You can customize your budgeting tool or spreadsheet to fit your specific needs. For example, you can add or remove categories, change the layout, or add new features.
10. Update regularly: Be sure to update your spreadsheet regularly, at least once a month, to ensure that your budget is accurate and up-to-date.

Sticking to Your Budget

Creating a budget is one thing, but sticking to it is another. One of the most important things you can do to stick to your budget is to track your spending and make adjustments as needed.

If you find that you are consistently overspending in a particular category, you may need to reduce your expenses or find ways to increase your income. Additionally, it’s important to have a plan for dealing with unexpected expenses, such as an emergency car repair or a medical bill.

Final Words

In conclusion, creating a personal budget is one of the most important steps you can take towards achieving your financial goals. By assessing your income, identifying your expenses, creating a budget, and sticking to it, you can take control of your money and make sure that you are using it in a way that aligns with your priorities. Remember that budgets aren’t set in stone, and it’s important to adjust them as your income or expenses change.