How to Create a Budget that has me in it

Budgeting, like cleaning and exercise, is one of those things that we all want to do, but we somehow end up too busy to get around to it. Unfortunately, the word “budget” has been planted with many pejorative connotations. Even article titles like “Ideas for Vacation on a Budget,” contribute to the negative aura surrounding budgeting. In the example-title above, budget equals “no money,” or “little money.  Another popular assumption about budgeting is that it means there will be no money left over for “fun.” Living on a budget, however, is the only way to make money for leisure. With a budget you can include personal expenses without that feeling of guilt experienced by so many non-budgeters.

The first step in creating a budget is to examine your current financial situation. A thorough analysis is not only an essential part of the process, but it will also give you a sense of peace that the money you have earned through hard work is going to the right places.

Calculate your net worth.

This means assets minus debts. Often, we tend to overlook the money that gets taken away from our pay-check. Google “net worth calculator;” you will find many free online tools to walk you through. Just punch in the numbers when they ask, where they ask. 

Track your spending:

In an interview, Suze Orman said we are “creating a society of liars, because people are spending what they can’t afford.” Chances are, you know exactly how much you spent on big-ticket items, but how much money are you spending on coffee, chocolate bars, or socks? You might find yourself saying “I never knew…” a lot during this phase. You will thus be better equipped to form an accurate budget. Go through your debit and credit card statements. If you keep receipts, check them for cash payments. If you don’t—start tracking cash from now on.

Once you have gone through these steps, you’ll feel more like you are in control of your money, not the other way around. Next step is to form the actual budget.

Annual vs. monthly budgeting:

The nice thing about building an annual budget plan is that it gives you a solid look at where your money will be in a year’s time. Month-to-month budgeting is still important, and should be done in addition to yearly planning; however, there are certain items like birthday  or Christmas gifts that need more than a month for which to plan. An annual budget gives these items a home, and leaves you less frustrated and more apt to enjoy these special occasions. Also, if you are a teacher, professor, door-to-door salesman, etc., your income may vary throughout the year; this budget helps you keep track of those ups and prepare for those downs. Therefore, it is not enough to merely multiply your monthly budget by 12.


Create an “income” column, to remind yourself what your limits are. The key to a good budget lies in spending less than what you have. Sounds too easy, but the reason people are in debt today is because yesterday they spent more money than they were making.

Beside your “income” column, create a “spending” column. This includes your mortgage, your cell phone bill, gas for your car and lawnmower, student loan payments, rent. But it can, and should, include your entertainment, the things you do to pamper yourself, family outings, nights out—anything you give money to, goes here.

The next column, while many choose to incorporate it into the “spending” column, really deserves a space of its own. It’s the “savings” column. This includes money that you are giving to yourself for retirement, your emergency funds, your kids’ college fund, or your daughters’ weddings fund—this column is includes the places you’d put your money if there were no “spending” column. By giving your savings their own column, you’ll feel better about where your “income” column is going. Moreover, it gives your entire income an “outgo” place; which will avoid overspending on coffee, chocolate bars, and socks.

Be honest:

When building a budget, don’t feel guilty when it comes time to fill in eating out or girl’s night out expenses—not only do you deserve it, but you need it. Any psychologist will tell you that. Be reasonable, however, and once you’ve set an amount, stick to it.

You time:

There are many ways to increase the amount of money you allow for your entertainment. Keep a change jar, and at the end of the month when you roll up the coins, give this money to yourself.  Another favorite is to shop at thrift stores, flea markets, and yard sales. You will be contributing to a healthier environment by re-using old clothes (or televisions, or air-conditioners, or hair dryers, etc.), you will spend at least 80% less than you would in a mall, and you will find uniquely stylish items you just can’t get anywhere else.

Another important step is to make sure that you are getting the best deals in your other spending categories. When you are grocery shopping for instance, compare brands. When you are buying products that come with packages, like cell phones or digital cable, make sure you are getting and paying for only what you use. When buying anything else, many stores have a “competition offer” that goes something like this: our store has the best price, in case you doubt us if you find it cheaper anywhere else, we’ll give it to you from our store for that price. Shop at these stores.

There are also many ways to increase your entertainment without increasing this part of your budget. Experience nature first hand instead of watching the discovery channel, and go for a walk. When you visit your friends, play a card game instead of going to a movie; this gives you that much needed chat-time as well. Instead of buying books, go to your local library.


Having a proper budget plan will give you the much needed sense of security in the years to come. Contrary to popular belief, having a budget does not mean you cannot enjoy life. In fact, it provides for all those little expenses that we so often forget about. Moreover, you will be happy knowing that the hard work you’ve put in at your job will pay off—literally. There is a “me” in money. You just have to do a little rearranging here, and a little subtraction there to find it.