Building Your First Budget

This is the fourth post in the Creative Savings’ Beginners Guide to Budgeting Series. To read all posts in order, start with Why You Need a Budget, then continue reading the rest of the series on this page. You can also check out this post for more than 60 tips that teach you how to manage money better.

Learn how to create a budget that gives you extra room to save -- includes FREE budgeting worksheet!

Now that you have a handle on tracking your expenses, we can dive right into the fun stuff – creating our very first budget! Own this part, because what you work on today will be the turning point to managing your entire finances.

Grab a snack, a calculator, your Income Tracker, and all your monthly bills, then settle in {with your spouse if you’re married}, and start working through today’s post slowly and carefully.

Creating a budget might feel a little bit uncomfortable at first, because we are essentially putting restraints on spending habits that can be really hard to break. But if you commit to this entire process, you’ll not only have an actionable spending plan by the end, you’ll also be able to save some extra money on the side!

Are you ready? Let’s begin.

Breaking Down Your Expenses

We kept our categories fairly broad when we talked about expenses in the last post, but now we’re going to break them down into sub-categories, and then mentally assign them either a fixed or variable expense label.

Here’s a quick definition of those terms in case you aren’t familiar with them already:

Fixed expenses generally stay the same month-to-month, while variable/discretionary expenses may vary by a little, or by a lot. Examples of fixed expenses would be your housing, cable/internet/phone, any loan payments, and all insurances. Variables are pretty much everything else, because they change each month depending on your needs.

Separating our expenses matters because once we start “playing with the numbers” so to speak, we want to know exactly what we can change, and what we have to leave alone. This will make a lot more sense in a few minutes! 

Using a Budget Worksheet is an easy way to figure all of this out. You can print off a printable version, or download an Excel worksheet; but either way, you want to have at least one of them handy while we work our way through this next section.

Use this FREE budget worksheet from Creative Savings to help guide you through your first budget!

Download the printable file

Download the Excel File {Calculates Automatically!}

How to Use a Budget Worksheet

1. Start by filling in the monthly budget amount for all fixed expenses {these are shaded in grey}. You may need to reference last month’s bills if you don’t remember the exact amount you pay each month. Remember, fixed expenses can’t change very easily, so fill in these numbers in pen to signify their permanence. If your number results in some change, round up to make sure you have more than enough saved each month.

Note: If you have credit card debt, stop using your credit card immediately and determine a set amount {higher than the minimum payment} to become your monthly “fixed expense” with the goal of paying off that debt as soon as possible. If you have more than one credit card, focus on paying off the smallest amount first.

2. Now, go through your Budget Worksheet again, and fill out the rest of your monthly budget totals in pencil. Look through past receipts for an average if needed, but otherwise give each category your best guess for now. You will probably have to mess with these numbers later, so you’ll definitely want an eraser nearby.

3. When you’re finished, add up all totals, and carry the numbers over to the bottom of the worksheet where all monthly expenses are listed. You will notice we’ve reverted back to broad categories again so everything is easier to track.

4. Using your Income Tracker, write down your average monthly income at the bottom of the worksheet where you’ll find a mini profit/loss section located.

Use your Income Tracker to fill in the monthly profit/loss section of the Budget Worksheet.

5. Subtract all your total expenses from your monthly income, and write that number down in the big grey box at the bottom.

Evaluating Your Final Budget

Here’s where it gets real. Remember when I said you really need to view your finances as a business? If your income is more than your total expenses – that’s awesome! You have some room to save for extras, and can work on decreasing expenses without the stress.

But if your income is less than what you are spending, it’s time for a budget overhaul. Go back through all your monthly expenses and see what you can drastically reduce or cut out completely.

Variable expenses are much easier to start with, although a fixed expense like cable can be eliminated entirely. Erase and change out amounts as needed, and keep adding up your columns until your current income covers everything you spend. You should not move on to the next step until you reach a positive balance.

There. That’s YOUR budget! 

The first month is always the hardest, so don’t be afraid to go back and rework your numbers if you find they weren’t as attainable as you originally thought. Budgets aren’t set in stone, and we can always make a few adjustments.

In my next post, we’ll start using a money management system that will launch your budget into immediate action. Any time a bill comes due, you will have the exact amount of money available to pay for it. You’ll also find the secret to control you money instead of letting it control you!

Are you ready to build your first budget?

 {Go to the next step: Create Your Own Money Management System}

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  1. Hi! Thank you for sharing these advices with us… I’m so interested, and I have a question! The annual expenses (like my annual gym subscription) should be divided in the fixed expenses for every month? How can I consider them? Thank you!!

    1. Hi Maria,

      Yes – I always break my annual expenses down and save for them, that way, when they come due they aren’t taking a huge chunk of my budget that month. So let’s say that you pay your car insurance annually and it’s $1,200. Every month I would have $100 budgeted for car insurance and I would move that $100 over to my savings account or somewhere that it’s not going to be touched. Then when it comes due, I’d pull the money from my savings account and pay the bill!

      Does that example help?

  2. Budgeting for me has always been so daunting! I have attempted it so many times and failed miserably. This has helped me so much! My HERO!! Thank you.
    I know I might be pushing my luck but is there maybe any way I could get an editable/blank budget worksheet? I live in Belgium (euros) and we have a few other things I would like to add and a few we don’t really need on there. I’m absolutely useless with a computer….the excel is just Chinese to me :/ I can probably find one elsewhere but your ones are just so pretty and easy to work with. ^_^

    1. I’m so glad you found this post helpful, Angelique! I’m not able to create an editable worksheet right now, but that is such a good idea — thank you! I’m planning on revamping this series in the next few months, so I will definitely add that feature during the next round. Enjoy your day!

  3. Hi Kayln,
    I am finding that your posts and spreadsheets are wonderful. I am a stay at home mom and during the winter months my husbands income decreases significantly. How would you budget in a seasonal income? The income doesn’t go away during the winter months, we have some money but when winter comes we are struggling significantly. Any advice is greatly appreciated!

  4. Kayln,

    I was just curious to how many months I should track my income and expenses before I start working on a budget.


    1. You can start working on your budget right away! You just might be doing a little guesstimating for the first month. However, you will definitely know what your fixed monthly bills are, so I would look over some past receipts to get an idea for the rest. As for income, if you have some paystubs for the last month or two, you can begin tracking it that way.

      Budgets are flexible and will adjust, so don’t be afraid to start just because you might not have the accurate reflection of numbers just yet! Once you are done with the first month, you will have a better idea on how to plan your budget for the next. 🙂

  5. Kalyn ,

    Thank you for your posts. My boyfriend and I are hoping to be engaged soon and we noticed we spend way more than we really have. We know a wedding will be expensive and have decided it would be better to start saving now. Neither of us really new where to start but I look forward to sharing your posts with him. Budgeting seems pretty easy and I’m sure once we see where our money is going it will be easier to know the unessesary things we can cut! 🙂 Thank you for taking the time to write these posts and sharing your wisdom! I greatly appreciate it!

    1. Marisa, you are SO welcome! I hope you enjoy the series and please let me know if you have any questions or something isn’t clear to you. Congrats on the hopefully-soon engagement! 🙂

  6. Your printables have been so helpful, but I have a couple questions for you. Should I print off a new budget worksheet every month or just erase the variable expenses as they change month to month? For example, my gas/sewer/electricity varies so greatly month to month that it’s hard to have an average. And how do you work with the tithes? We give 10% of our income, so should I put that percentage next to tithe in the worksheet or try to come up with an average?

    1. I’m so glad this series is helping you, Jillian! I personally redo my budget worksheet {erasing and adjusting the variable expenses} every 3 months…usually when the seasons change, because so does my utility usage! Another idea is to treat it like variable income, and set aside one of your larger bill payment amounts as a monthly budget. Then when the lower bills come, you’ll have more than enough to cover them, but keep that same amount going in your budget column each month, and let it grow so it can cover a higher than usual month. I explain more about that process here:

      With the tithing, we give 10% as well, and I do very similar to the variable expenses where I set aside an amount I know will cover some of our higher earning months. By the end of the year, if I still have money in that column, I’ll donate extra to our missionaries, or send money to a charity I’d love to support year-round, but am not able to all the time. I hope that makes sense! Let me know if you have any other questions. 🙂

  7. Kalyn, thank you so much for taking the time to write all this! I’ve been meaning to create a budget. I am going work on it tonight. Can’t wait! You eased my mind 🙂


  8. Hi Kalyn,
    I’ve really enjoyed all your posts. Do you have any suggestions regarding student loans? I feel like go back and forth on whether I should pay as much as possible back or save a bigger percentage of my income. What are your thoughts with someone with significant (over 80k) is student debt?

    1. That IS a really hard call to make. If it were credit card debt, I would encourage you to put everything extra you have towards it to pay off those high interest rates as soon as possible. But if your student loan has a decent interest rate, I would try to save up at least $1,000 in an emergency fund first, then work on paying off the debt because you now have a buffer just in case anything else goes wrong. I hope that helps – and good luck – I know you can do it! 🙂

  9. This is a fantastic series of posts. We try to budget but it usually turns into a desperate overhaul of finances once every few months rather than a regular thing. I am going to try some of the strategies you have shared in this series. Thanks!

  10. Hi Kalyn, What if you are self-employed and your income varies greatly from month to month? How do you handle that:? That is our case and we never know what our income will be. It makes it very difficult to budget I have found. Any suggestions?

    1. Budgeting with irregular income is really difficult, but definitely not impossible. Plus, it’s all the more reason to HAVE a budget!

      The key is to mimic regular income as much as possible, so look at your past few months worth of numbers, and write down one of the lower-end paychecks you’ve received to create a large buffer. This number now becomes your monthly “paycheck”, so you want to take out that specific amount from the bank each month to cover expenses. Some months, pay will be higher, so make sure to save for months when it will be lower to cover that SAME monthly amount. Sometimes, having two separate accounts can help – have the income deposited into this account, and use it to withdraw your set paycheck to deposit in your personal account. That way, the savings will build up in that one account for when you have a lower income month, and you won’t be tempted to touch it. 🙂

      I hope that made sense, and helped at least a little bit!

  11. Hello! I’m excited to start tracking my expenses And make my first budget which is perfect bc I am moving out on my own for the first time after graduating college. My question is: I am moving out with my boyfriend and we will spilt everything down the middle (fixed costs). We usually switch off who buys the groceries or eating out every other time. But my question is how do I track this on my budget if we are switching the food bills. How should we go about sharing this expense?

    1. Kate, that’s awesome that you are taking the first step to creating a budget…you are already so ahead of many collage graduates!

      I’ve been thinking about your question, and I have two possible options for you:

      1. Use a cash envelope system for your groceries and eating out expenses. Decide on how much you want to budget for each, then divide it by 2. At the beginning of the month, both of you should pull out that amount in cash from your bank account, and put it in the envelope. You can now use it to go shopping or out to eat without worrying about how the bills are split. If you happen to be out and forget the envelope, you can always use it as a “petty cash” system and reimburse whoever bought the supplies or dinner out from the cash envelope. If you have money leftover, use it for a special occasion or to stock up when items are on sale!

      2. If you don’t want to use cash, keep track of all receipts for both groceries and eating out, and then at the end of the month, add up the receipts and split it in half. Reimburse each other for what you’ve bought so that it equals out between the two. For example, if your budget was $200/month for groceries, and you bought $150 of them and he bought $50, he should reimburse you for $50 more. Same with eating out.

      I hope that helps and makes sense! Happy Budgeting. 🙂

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