money management personal debt personal finance Nov 24, 2021

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Budgeting is a necessary evil when it comes to long-term wealth building. Without a personal budget, you will end up in a rabbit hole over overspending and make it seem almost impossible to manage your money. Some people use spreadsheets to budget. Others, like myself, use apps on their phone. Others may use a pen and a piece of paper. Regardless of what method you decide to use, I will give you some of the basics. Get a pen and paper, and let's get started!

4 Steps to Preparing any Budget

There are a few things that apply to all budgets.  Regardless of what method of budgeting you decide to track your income and expenses, four things always apply:


First things first! You have to know how much is coming in. Write down all income you receive every month. This can include pay from jobs, cash gifts, income from business ventures, child support, alimony, pretty much anything that hits your bank account as a credit. Now that you are looking at these numbers, do you feel this number is enough to sustain your current lifestyle? If not, you may have an income problem, but we will see as we continue through our process.


Next, let's write down all monthly expenses (not including debt - more on that later). Start with necessities, such as rent, mortgage, water, electricity, groceries, etc. As you work down the list, start adding the non-necessities like that gym membership you rarely use and recurring expenses like Netflix. Be sure to account for all your monthly variable and fixed expense. 

So, at this point, you may be getting a little nervous, but we aren't quite done yet. Now, I want you to check out your percentages. Break out the expenses into categories. As a guideline, I have charitable (10-15%), savings (5-10%), housing (25-35%), utilities (5-10%), food (5-15%), transportation (10-15%), clothing (2-7%), medical/health (5-10%), personal (5-10%), and recreation (5-10%). The percentages are your spending in relation to your income. (For instance, let's say you make $3000 a month. You spend $845 a month on housing. This includes rent/mortgage, insurance, repairs, and home decor. That would land you at about 28% of your income going towards this category ((845/3000) * 100). So, you are still within the recommended limits.)  These percentages are just estimates/guidelines. You may need more or less depending on your circumstances and the cost of living in your area. I have a few clients in California, and their spending in the housing category is generally more than 25 to 35%.


Now, let's write down all of your debts. I don't know about you, but this section gives me the most anxiety! Debts would include credit cards, student loans, personal loans, car loans, overdue bills that have made it to your credit report, etc. A good rule of thumb is that it is a debt if you can see it on your credit report. (Don't know what's on your credit report? Download Credit Karma as a good starting point. There will be a separate post on the topic of credit). You may be feeling a hint of depression after completing this step but don't fret! This is why we are doing this! You have to be aware of your current situation to know where and how to make the necessary adjustments. That is the power of budgeting!

Putting it all together

Now that all of your numbers are laid out in front of you, you can start planning your method of attack! Let's go back to the expenses section. Starting at the bottom, is there anything you can start cutting back on? Maybe eating out, Netflix, the gym? Start trimming the non-necessities first. You may be saying, "But Tiffany, I can't go without binge-watching my favorite TV shows or seeing my favorite fast-food workers that have become like family." My question to you is how bad do you want it? Sometimes, we have to live somewhat uncomfortably to create the life we want to live. I promise, once your finances are under control, you will find the sacrifices were well worth it. 

Seriously evaluate your financial goals.  See if your budget aligns with your goals.  If saving is a goal, do you save enough each month, or would you like to increase that number?  Think about your household as well.  Do you have kids that are going to college?  Are you setting your future college students up for success?  Be sure that your spending aligns with your overarching finance goals.

If you get through this exercise and find that after cutting all non-necessities, you are still in the negative, you have a bonafide income problem! It may be time to find a new job, get a second part-time job, or pick up a side hustle.

Once you have a budget for the following month, stick with it! It may take a few months to get it just right, but you have to start somewhere! It would be best if you threw all of the money left at the end of the month at savings or debts (we'll talk more about that later). At first, you will be amazed at how much money was going out of the window just by not tracking your finances. Then, it will start becoming a habit. Again, these are just the basics. As we progress in our budgeting journey, we can add more nuances to really personalize the experience.

Should you use a budget template or app?

This is completely up to you!  To make your decision, you should consider your personality style and what would be easiest to use for your lifestyle. Over the years, I have used all of the methods I mentioned at the beginning of the article, and over time my preferences changed. Regardless of what you decide to use, the key is just to get started! I will break down the pros and cons of each approach.

Budgeting Spreadsheet

I included a link to a FREE budget spreadsheet to use as a template.  I always start with an Excel budget, even if I decide to use a different method later.  In the video above, I show you how to use this budgeting spreadsheet to its fullest capabilities.  This budget template works very well in Microsoft Excel. If you have access to Google's suite of collaboration tools, this spreadsheet is also usable in Google Sheets. I highly recommend using Google Sheets if you need to create the budget with someone else or would like the option of taking it on the go. Google Sheets has an app where you can open the budget and track your monthly expenses from anywhere.  If spreadsheets are your jam, this is for you!


  • Formulas make it easy to do calculations

  • Data is easy to input and manipulate

  • There are lots of budget templates available online for budget spreadsheets.

  • Works well for a monthly budget or weekly budgets


  • Must have a certain level of spreadsheet knowledge
  • It May look overwhelming at first
  • It may be hard to track accurately on the go


Budget Planner & Budget Worksheet

There are quite a few free budget planners and worksheets out there for those that like pen and paper to help keep things organized. Or you could even make your own budget planner by just doing the steps we talked about before simply on a sheet of paper. The Internet is full of budgeting templates that you can download, print out, and write down all of your information.


  • Very basic, and anyone can do it
  • Writing information out sometimes helps for retention
  • A quick way to get it done


  • You will have to calculate your numbers manually
  • It may be cumbersome to keep up with papers every month 


Budget App

I absolutely love budgeting apps because it is the simplest way, in my opinion, to have the best of all worlds.  There are a few free budget apps in the app store, but I have found the ones that make it easy to track your expenses by aggregating (connecting) your bank accounts do have a small cost.  I personally use EveryDollar for my budget, but others like You Need a Budget (YNAB), and Mint work well too! 


  • Easy to take on the go
  • Easy to track expenses as soon as they happen

  • Some have built-in tracker tools

  • The most control over your spending


  • Have to have a phone
  • It may not be easy to use for some people
  • Easy to disregard any app alerts since we have apps for everything (app overload)


What's the 50 30 20 budget rule?

It's a rule where you allocate 50% of your income to needs, 30% to wants, and 20% to your financial goals.  To use this rule, you would take all of the steps we did above in collecting your expenses and put them in inclusive categories of "needs", "wants", and "financial goals".  Sometimes, it is good to look at your same budget from different lenses (percentages discussed above vs. 50-30-20).

What Is The 70-20-10 Budget?

Similar to the 50 -30-20 rule, this one says you put 70% of your income towards monthly spending, 20% set aside to save and/or invest, and 10% for debt or donating.  Whatever method you decide to use should go in line with what your financial goals are.  This method wouldn't work for me personally because I would want to pay more towards debt.  Do what works for you!


Budgeting doesn't have to be complicated, and the beauty is that there are so many ways you can do it.  You can tailor the budget to your personality style and what would make it easiest to stick to.  As you create the financial life you want, use a household budget to manage your money flow and make personal finance easy!

Still need help?

Click here to order my book Budget Nirvana where I explain these concepts (and more) in greater detail.

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