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5 Easy Steps to Create A Budget That You’ll Actually Use

Create a budget. For many of us, the words are as repellent as the sound of an old car dragging its muffler down the street. Both are enough to make us hide somewhere with our fingers in our ears.

woman on sofa trying to create a budget

In spite of the fact that I have a personal finance blog, you’d be surprised to know that budgeting is not my favorite thing to do. But I’ve found that being organized can help take the sting out of budgeting.

Hindsight is 20/20, and after the changes, I’ve made in my financial decisions, I now see budget planning in a more positive light.

It made it easier for me to track my spending, get out of debt, and have a greater appreciation for the times when I could cut loose a little.

And once I figured out how to develop a system that worked well for me and my family, my life got a lot less stressful… even when we fell short of our savings goals or had to break a budgeting rule now and again.

What we don’t know does hurt us. We feel stressed out when we’re not on top of “scary” situations.  Debt denial is a real thing, and if we hide from reality, it just snowballs.

If, on the other hand, we stay informed of our expenses, savings benchmarks, and our income, we’re in a better position to make informed decisions.

Here are some baby steps to get you started. And don’t get discouraged; with the right system, it’s easier than you think… and the payoff makes it worthwhile.

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How To Create A Budget Strategy

1. Get Into the Mindset

Are you revved up? What about your partner and your family? As you put together your spending and savings strategy, consider how you’ll bring your household on board.

As you’re organizing your finances, think of how your partner can participate in the recordkeeping and goal-setting, and how you’ll frame the conversation with your household members.

Don’t forget, you’re also setting a positive example for your kids, both in the present and for their future.

2. Create a Budget Binder

Technology makes a lot of things easy. File sharing applications, accounting software, cloud storage… it’s all great, and there’s definitely a place for it. I’ll even share some tech tips later on.

But what I love about the binder system is that it’s handy. You don’t need to fire up your computer, figure out spreadsheets or software, and make sure you’ve backed up your files.

Plus, you can grab your binder and sit down with your partner and family whenever you want to make notes and update your records.

Trust me. It’s the path of least resistance. You’ll want to pick out a 2″-4″ binder on Amazon or at your local dollar store. You can even recycle one from last year’s school supplies.

Download and print my free monthly budget planner sheets. I have a list there for useful binder storage accessories, and I highly recommend you pick some up. Once you’re all set up, it’s time to dive in.

3. Track Down & Organize Your Paperwork

First, gather your cardboard boxes or storage totes full of unopened bank statements, bills and loose receipts.

I recommend using an out-of-the-way area where you can power through this part without distraction or feeling like you have to stuff everything back into a box halfway through the project.

You can use as many binder divider sheets as you want, as long as they’re clearly labeled and they make sense to you:

  • Utilities,
  • insurance,
  • rent receipts,
  • loan and bank statements,
  • etcetera.

You’ll keep your paycheck stubs here, too. Keep your documents filed by date so they’re easy to find, but use a method you can realistically maintain.

Save retail register receipts for last. For example, tally up your gas station receipts for each month, and put them in a medium-sized Manila envelope.

The same goes for grocery receipts, which you’ll want to keep on hand to decide how to prioritize your food purchases. Stash your envelopes in an inside binder pocket, or punch holes along one side to insert into the binder rings.

If you’re finding a lot of stuff from prior years, you’ll want to keep whatever applies to your tax returns. Otherwise, go ahead and get rid of it. While it’s useful to have historical data, you don’t want to go overboard.

Have a big trash can ready for junk inserts, envelopes, and other discarded materials, and try to adhere to this rule: Only handle each financial document once. This means, as soon as you locate it, either put it in your binder or chuck it.

4. Start Crunching Numbers

  • Income-Total your net income from all sources, and mark your paydays on your binder’s dedicated calendar. (You’ll find one on my Free Printable Resource page.)
  • Fixed Expenses-Write down your recurring fixed monthly expenses: Utilities, insurance, mortgage, childcare, entertainment subscriptions, etc.
  • Variable Expenses-Write down your monthly variable expenses: Groceries, entertainment, laundry, dry cleaning, pet grooming, gas.
  • Annual Expenses-Total up quarterly or annual expenses such as routine (or unexpected) auto repairs and maintenance, carpet cleaning, gift-giving, taxes, and personal travel; once you have a total for each category, divide them by 12.

With rough numbers, you’ll see how your expenses compare to your income. Use my budget planner worksheet to organize expenses into different categories for a more detailed view.

Can you see any glaringly obvious ways you can save some money? When you have the numbers in front of you, does it change the way you feel about certain purchases or spending habits?

Now you can realistically earmark portions of your income for living expenses while making more careful decisions about how you spend your mad money.

5. Maintain Momentum

Once you’ve organized your binder, experienced your wake-up call, and set up a budget, you’ll want to keep your binder where you can easily and quickly access it at home.

Do your best to file away receipts at least once a week. Pick an evening when you can spend 15 to 20 minutes reviewing your budget and “catching up” on your filing.

If you want to go wireless, you can take quick snapshots on your smartphone and organize your receipts anytime on a productivity application like Evernote, or use a budget app to organize your receipts.

Just be sure to have a sensible organizing system for your receipt images, and don’t forget to write down your spending data on your “hard copy” planning sheets.

You’ll adapt your system to your own preferences, and you’ll round out your budgeting strategy as you learn more about—and improve—your spending habits.

If you’re like me, you’ll find it useful to keep a scratchpad in your binder for money-saving ideas, and you’ll definitely come up with your own tricks to make your binder (and your budget) work for you and your household.

Don’t give up. You’re building a new habit, and according to research, it takes an average of two months to make it stick. You’ll be amazed by how quickly you’ll accumulate savings, and how you’ll find money to pay down your debt even before it becomes second nature.

Do you have any questions, or need a little inspiration? Leave a comment below! And, of course, keep my blog bookmarked for more tips to keep you moving toward a stress-free financial future.

Click the image below to print your free budget worksheet and get started today!

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