Checking’s and Savings: Creating a Budget That Works for You

I frequently write about the importance of money and finances throughout various blog posts because I believe that to acquire financial stability, you must understand where your money is going and the areas in which you can save, grow and repurpose your flow of income.

Before you pull out the pen and paper to start budgeting, download my Free Personal Monthly Budget Spreadsheet. I use this specific spreadsheet every 6-12 months to ensure that my money is being used properly and where I need to scale back.

The spreadsheet listed above is extensive so if you are new to budgeting, below is a step-by-step guide that will push you in the right direction towards financial freedom.

Print out my Free Personal Monthly Budget Spreadsheet and follow along!

Step 1: Calculating your monthly income

List all your income in your budgeting tool. This step is important so don’t leave anything out like rental income or extra income from a side job. Include all sources of income.


Your income is what you’ll subtract your expenses from. This step will be listed later, so you do not want to skip this step or come back to it later. For most people, this is simply the money they take home from their monthly salary.

If you are a business owner or if you have additional income from the second source of income, you will want to include all your income in your budget. Try your best to estimate what your monthly income will be for this month. If your income is inconsistent, take the average of the last three months income and use that as your income or “projected income”.

Here’s an example:

  • Take home pay: $3500/month
  • Blog income: $500/month
  • Dog walking: $100/month

Step 2: Add up your fixed monthly expenses

In this step, you want to list all of your monthly expenses (actual income) as listed on the spreadsheet.

If you’re not sure what your expenses are since you haven’t budgeted before, go into your checking accounts online from the past 1-3 months and use the average number for each expense category. Depending on how chaotic your finances are, this task may seem intimidating. But it’s important to use as close to exact numbers as you can to make your budget as accurate as possible.

Your expenses should be written out as followed:

  • Rent: $800/month
  • Electric: $65/month
  • Gas: $0/month (not included in rental fees)
  • Water: $110/month
  • Groceries: $84/month
  • Student Loans: $236/month

You can continue this process with all mandatory bills that need to be paid each month.

Step 3: Determine optional expenses

Your discretionary expenses are expenses that you currently pay for, but that is not essential. Examples of discretionary expenses include entertainment, dining out, gifts, vacations, personal care, and clothes. These are costs that can be adjusted based on what you can afford. Notice that they come after your fixed expenses and financial goals. It’s important to prioritize your financial health over unnecessary things, such as entertainment and vacations.

Optional expenses:

  • Entertainment: $100/month
  • Dining out: $50/month
  • Clothes: $75/month
  • Hair and Beauty: $60/month
  • Other: $115/month

Step 4: Subtracting your income from expenses

Now that we have all of that out of the way. It is time to do some math and seeing what you end up with at the end of each month.


If you get a positive number, then this means you make more money than you spend which is what we all strive for. Now, you can go back to your budget and adjust your numbers if you need to. You want to give every dollar a mission in your budget, so you’re completely planning out what each dollar is for.

If you break even, this means you have exactly enough money, but no margin or room to move things around. You may want to adjust your budget to give yourself some breathing room in the form of a “discretionary” category if things come up that you did not plan for.

If you get a negative number, this means you’re spending more money than you take home which will happen for many first-time budgeters. If your number is negative, adjust your budget by decreasing some of your discretionary expenses or find a way to increase your income. A way to decrease your discretionary expenses is to spend less on entertainment, dining out, or other non-essential things. Make sure your financial goals are being met before spending on optional items.

Step 5: Setting Financial Goals and Re-budgeting

This final step I like to do last because it can be depressing to see how much money you’ve wasted while still trying to save or set goals without finishing out your budget.

If you haven’t written out goals before, you can start by looking at the vision you have for your financial future. For example, do you want to be financially stable in the coming years? Do you wish to get out of debt by the time you are 40? Think about what you want financially and where you are right now. Then, determine your personal financial goals that you want to set for the short-term. I like to start out with yearly increments so that way it’s not too overwhelming or forceful.

Lastly, based on the information that you gathered from your Free Personal Monthly Budget Spreadsheet , you can now see what you need to improve when spending. You can always recalculate your budget, especially if income level changes, unexpected events occur or if you suddenly become a millionaire overnight.

What are some financial goals that you have set for this year?

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