Create Your First Budget

Let’s tackle your first budget. It’s not going to be perfect – budgeting is an ongoing process that will continue to change every month, and improve the more often you do it. So don’t get hung up on getting it absolutely right. Just get it done and adjust for imperfections next month.

To do your first budget you’ll want to download our Free Budgeting Worksheet.

Of course you could do it old-school and just grab a blank piece of paper and a pencil, but we’ve made it pretty easy with our Free Budgeting Worksheet.

Before moving on, make sure you have about 30-40 minutes to work through this post and the budgeting process. If you don’t have that much time right now, feel free to skim through, but come back later when you have the time to spend.

A Plan For The Month

You’re about to create a budget for the next month. You’re going to estimate how much money you’re going to make, and then you’re going to determine how that money should be spent over the next 30 days. Keep that in mind as you work through this process.

You’re not trying to make decisions for the next year, or even three months down the road. What matters is what needs to be accomplished now in the coming month.


Let’s start at the beginning with the money that you’ll be bringing in. Income means every source of money you have coming into your household this month: your day job, your side job, any rental properties you own, child support. Anywhere you receive money during the month, write it down in your income.

Write down your income as after-tax dollars, and if you’re married, combine your incomes on the same budget. More on that later, but we believe, if you’re married you should be combining your finances.

If you get paid straight commission, self-employed, or have a situation where you’re paid irregularly, your unpredictable income makes it all the more important to have a budget. You’ll still need to estimate the amount you’ll make in the coming month. If you have no reason to suspect that you’re income will dramatically decrease, a good place to start is by averaging your income over the last three months and using that as your monthly income.


Expenses fall into a lot of different categories. You’ve got your givens that are locked and regular every month – like your mortgage or rent, and your car insurance. Theses types of expenses don’t change from month to month.

Then you’ve got things like utilities – water, gas, electric, cell phones – they may sway from month to month, and fluctuate across the seasons, but they’re relatively predictable.

Finally you’ve got your day to day expenses on things like groceries, clothing, household items, fuel, gifts.

You’ll see in our Free Budgeting Worksheet that we’ve broken down Expenses into five different categories: Household Expenses, Regular Monthly Bills, Discretionary Spending, Debt Payments, and Targeted Savings. You’ll also see another category off to the right hand side called Your Periodic Bills – we’ll get to that one later.

We’ve given you a handful of expense items to consider, and you’ve probably got some more to add as well. We’ve given you some open lines to add more expenses as you need them. Don’t feel like you need to fill every single line. Certainly if you don’t have a Student Loan to pay off, don’t go take one out just to fill out this budget worksheet.

Before you start jotting down numbers, consider your financial lifestyle and the types of things you and your family spend money on each month. Are there categories to add? Ones to delete? Do that now before moving on to the next step.


Obviously with over 30 types of expenses to consider each month you’re going to have to make some choices. Some expenses are more important than others. Some months, if your income is a little light for whatever reason, you’re going to have to consciously choose to pay the home mortgage before chalking away money in your Restaurants & Dining category.

So how do you side what’s most important in your budget? Follow this plan:

1 – Food: Carve out money for groceries first and foremost. You have to survive, and to survive you have to eat. Make sure your family gets fed before anyone else gets paid.

2 – Electric, Water & Utilities: You gotta keep the lights on, the heat pumping, and the water running. You may say, but isn’t my mortgage more important than the electric bill? Living in a house without electricity is no fun, unless you’re truly in to minimalism. Plus, the utility company will turn off your water and electric in a heartbeat. With the mortgage, you’ve got a little leeway in time before they really start hounding you.

3 – Mortgage / Rent: Yes, it comes right behind the Utilities. We’d never advise you putting off paying your mortgage or rent unless it’s an absolute dire emergency.

4 – Transportation: Put gas in the car, and pay the monthly payment on the car loan. If you can’t get to work, you can’t make money, which would defeat the whole purpose of doing this budget anyways.

5 – Basic Clothing: Here we’re talking just enough of a clothing budget to get buy, to make sure you’re presentable at work, and your kids have clothes to wear to school. This is not the time to be considering designer jeans, Gucci handbags, and frivolous trips to the mall.

Once these five categories are tackled – and you’ve allocated money to each one – you can move on to other categories and work through the rest of your budget.

Putting It All Together

Now it’s time to put some numbers down on paper (or preferably, on our Free Budgeting Worksheet, which you can download right here).

Start working through every Expense you’ve listed and assign a dollar amount to it in Column B of the worksheet. You’ll notice as you go that subtotals are tallied up for each Category to let you know how much you’re spending in each area.

Some of these categories may be more complicated to tackle than others. Your mortgage and car insurance are probably the same every month, but for things like Fuel and Groceries you’re going to need estimate. Go through the last couple months of online bank statements and figure out approximately how much you’re spending in each category. Remember, it doesn’t need to be perfect this time around, but you want to get a fairly accurate sense of how much you spend on a month to month basis.

At the very bottom of the worksheet you’ll see a Grand Total of all your expenses. The goal is that your Grand Total of all expenses equals the total amount of money you’ll earn this month, listed at the top of your worksheet.

We’ve made this easy for you to spot: the last line on your worksheet says “INCOME – EXPENSES SHOULD EQUAL $0”. If the number on this line is greater than $0, then you’ve got more money to spend. If it’s less than $0, meaning a negative number, than you’re going to need to find areas in your budget to trim expenses.

But if Income – Expenses = $0, then you’re done! And great job – you’ve successfully created your first budget!

Now What? What Comes Next?

Wow, ok. That was a bit of a job… and a really long post. Now what?

First, we’d recommend taking a bit of a breather. But then, creating your first budget is just the beginning. Now you get to put it into action and live out your month, paying attention to how much money you’ve allocated to each Category. Creating a budget and living according to a budget are two different things, but don’t worry, we’ve got the tools on this site to help you accomplish both.

Chances are as you go through the next four weeks you’re going to find some things that were off in your initial budget, and some others were wildly and grossly miscalculated. That’s ok. Together we’ll work on refining your budget and discover ways to live according to a budget that will make creating a budget in the first place all worthwhile.

Check out some of these posts that will move you down the road of becoming a budgeting wizard!

How To Set Goals With A Budget (And Achieve Them)

What Should I Do With The Periodic Bills Section?

What If I Don’t Have Enough Money To Cover The Necessities?

What Is A Budget and Why Do You Need One?

A budget is simply a plan for your money. That’s really all it is. It’s a plan for how to get from Financial Step A to Financial Step B.

If you want to drive from Phoenix to Chicago, you need a map. If you want to bake a birthday cake, you need a recipe. If you want to get rich, you need a budget. A budget is your financial road map. It’s your recipe for money.

We’re going to show you how to make one, and how to use it correctly. Perhaps most importantly, we’ll make sure you don’t end up shivering and convulsing on the floor at the mere mention of the dreaded words: let’s make a budget.

The great misconception about budgeting is that people think a budget is intended to cramp their style. As if living on a budget means eating buttered bread for every meal. As if it means no restaurants, no date nights, and no vacations. This couldn’t be further from the truth!

A budget is not handcuffs for your money. A budget is a plan for your money! It’s the budget that sets your money free.

So if you want to pay off your debt, go on vacation to Hawaii, or plan for retirement, you need to start with a budget. It’s one thing to have money, and it’s great to have goals. But it’s within your budget that you tell your money what to DO! It’s within the budget that you take control of your money, and stop letting your money control you.

Zero: The Most Important Number On Your Budget

Now here’s something to wrap your brain up in a pretzel. When a proper budget takes into account all of the money you make (your income) and all of the money you spend (your expenses) in a month, you end up with $0 left at the end of the month:

- Expenses

But wait… I thought a budget was supposed to help me save money! Why is there a big fat $0 at the end of my budget?

This is why. And it’s something many people miss and gloss over. A budget is a plan for every single penny you have. Some of your money each month is going to go towards bills. Some will go towards debt. And hopefully more than a little will go towards savings. But each of these things are “expenses” in the eyes of the budget, and each of those expenses need to be planned for.

The financial planners call this a “zero based budget”. Here you account for every dollar you’ll earn and give it a job to accomplish for the coming month. And at the end of the day, you’re left with exactly that: $0.

And that’s a good thing!

So, ready to spend all your money this month? Let’s take a stab at your first budget!

Start Here!

So let’s get started. You’re probably here at Budgeting For Beginners for one of a few reasons:

  • You know you need a budget, but you don’t know how to make one.
  • You know you need a budget, but you hate budgeting!
  • Your personal finances are out of control and you don’t know why.

Over the past few years, friends and family have come to us because they need help with their own budgeting, and we hope we can do the same for you! Personal finances can be overwhelming, sometimes scary, and often intimidating. If you hate spreadsheets, if numbers overwhelm you, then this is the place for you. We want to help break down the process of managing your finances in an easy to understand way.

We’re not accountants or financial planners. We’re just a couple regular guys, with regular jobs, and young families. We know what real life family finances look like, and we’ve been through the struggle with debt and irregular income. Our “been there, done that” approach will help you tackle your personal budget in a straightforward way.

So, are you ready to get started? Let’s get your finances organized!

What to Read Next:

What Is A Budget And Why Do You Need One

Drafting Your First Budget