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How to make a budget

Start from what you take home, list your fixed bills, and set a number for each category from what you really spent. Then check your budget every week.

6 min readUpdated

A budget is a plan for what your money will do this month, made before the month starts. You write down a few numbers, check them against what really happens, and fix the ones that turn out wrong. It doesn’t have to be strict, and you don’t fill it in once and forget it.

Why it matters

With a budget, you decide once instead of at every checkout. Without one, each purchase is a new choice made on the spot, often when you’re tired or hungry. A budget lets you make those choices ahead of time, when you’re calm.

It also shows you the trade-offs. Money spent on one thing can’t be spent on something else. If you want $100 more for eating out, it has to come from somewhere, and a budget lets you pick where.

You catch problems early, too. If you notice in the second week that groceries are running high, you still have time to adjust. If you only find out when the card bill comes, the month is already over.

And saving stops being whatever’s left over. When saving is a line in your budget, it happens. When it’s whatever remains at the end of the month, there’s often nothing left.

How to do it

These steps cover the same ground as the Consumer Financial Protection Bureau’s guide to making a budget: what comes in, what goes out, and when your bills are due. Its budget worksheet is a handy place to write it all down.

1. Start from what you take home

Use the amount that lands in your account after taxes and anything else your employer takes out, not your salary. If your pay changes from month to month, plan around a low month instead of an average one. How to budget with irregular income covers that in more detail.

2. Write down the fixed bills

These are the bills that stay about the same every month: rent or mortgage, utilities, insurance, your phone, the minimum payment on any debt, and the subscriptions you’re keeping.

3. Look at what everything else really costs

Groceries, eating out, gas, shopping and fun change from month to month. Don’t guess at them. Use the last two or three months of statements, which is what tracking your spending gives you. A budget built on guesses tends to fall apart in the first week.

4. Set a number for each category

Start each one at about what you spend now. Then change a few on purpose: the ones you want to bring down, and any goals you want to save for. It’s easier to stick with two or three changes than with fifteen.

5. Plan for the months that aren’t typical

Car insurance twice a year, holidays, birthdays, new tires. These are easy to leave out because they don’t happen every month, and then they show up all at once. Utah State University Extension suggests adding up a year of these bills, dividing by 12, and setting that much aside each month. That’s what sinking funds are for.

6. Check in every week

Ten minutes a week is enough. Compare what you’ve spent so far with each number. When a category runs over, take the difference from another category, or accept it and move on. Change the numbers when you need to, but keep the spending you record honest. A budget only works if it’s checked against what you really spent.

Two budgets, before and after a weekly check-in, each drawn as a bar with a line where its budget ends. Green is what was spent within the budget, and red is what was spent over it. Before: eating out has a $100 budget and $130 spent, so it’s $30 over. Fun has an $80 budget and $20 spent, so it has $60 left, and $30 of what’s left is outlined. An arrow moves that $30 of the fun budget to eating out. After: eating out has a $130 budget and $130 spent, with $0 left, and its whole bar is green. Fun has a $50 budget and $20 spent, with $30 left. Together the two budgets are still $180.BeforeSpentOverBudgetEating out $100 budget$30 overFun $80 budget$60 leftMove $30AfterEating out $130 budget$0 leftFun $50 budget$30 left
An example check-in. Eating out ran $30 over, so $30 of the fun budget moves to cover it. The two budgets still add up to $180.

7. Expect the first few months to be off

Your first budget is still partly a guess. By the third month, real spending has corrected most of the numbers, and the budget starts to feel like it fits.

How to do it in Simple Balance

In Simple Balance, a budget compares what you planned to spend in a category with what you actually spent. A budget never changes your balances, so deleting one changes nothing else.

Start with real spending

Bring in a month or two of statements first, or type them in, so your budget starts from real numbers. How to track your spending shows how. Then Overview shows your spending by category, so you can see what each one really costs.

The Simple Balance overview for one month: a dollar total with balance, deposits, withdrawals and net cash flow across the top, then a checking account, a savings account and a credit card with their balances, beside spending by category as bars from rent down to subscriptions.

The money in this picture is made up. It’s the real product, filled with example spending.

Set a budget

Open Budgets. Under Set a budget, choose a category, type the monthly amount, pick the date it starts, and press Set budget. That one budget covers every month from then on until you end it, so there’s nothing to set up again next month.

The budgets screen: a form for setting one, with fields for the category, the amount and how it's decided, the currency, a start date and an optional end date, an optional savings goal and which budget gets funded first, and a checkbox for carrying what's left into next month. Below it, the list of standing budgets begins with $200 a month for dining out.

The money in this picture is made up. It’s the real product, filled with example spending.

Read your budget

Each budget gets a row. Budget is your limit, Spent is what you’ve spent, and Remaining is the difference. A refund lowers Spent, since it gives back money you’d spent. A month that isn’t over yet is marked So far, because being under budget halfway through the month doesn’t mean you’ll finish under.

Two budget rows for October, halfway through the month, so the month is marked so far. Each row has a badge, then a bar that ends at a line for the budget. The whole bar is the budget, the filled part is what’s been spent, and the empty part is what remains. Groceries: a budget of $400, $260 spent, $140 remaining, marked So far, with its bar about two-thirds full and green. Eating out: a budget of $100, $130 spent, so remaining is minus $30, marked Over, and its bar is full and red.October (so far)TodayGroceriesBudget $400So farSpent $260Remaining $140Eating outBudget $100OverSpent $130Remaining −$30
An example month that isn’t over yet. Groceries is under its budget so far. Eating out has already gone $30 over, so its bar is full and red.

Spending in categories you haven’t budgeted shows up too, so you can see where the rest of your money went. A category you budgeted but didn’t spend anything in still shows, at zero.

Let one month be different

December’s grocery bill isn’t the same as November’s. Press the calendar button at the end of a budget’s row to set an amount for just that month. Clear it later to go back to the usual amount.

A simple first month

Set budgets on your five biggest spending categories at about what they cost now. On the two you most want to control, check Carry what is left over into the next month, so money you don’t spend stays put for later. For the next big bill you know is coming, set a budget and fill in Saving up for and Needed by. Then come back once a week. The Budgets page in the documentation has more detail.

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