Making a budget

Benefits of a Budget and the 7 Keys to Make it a Success

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7 Keys to a Budget

Fail:  Overspending each month by $1000.

Flip:  Setting a budget and sticking to it!


Do you every wonder why you should be on a budget?  I went through most of my life thinking a budget was just way too much work and not worth doing.  After I found myself in the situation where we were overspending by $1000 a month, I decided we needed to make a change in a big way.  One key was a budget.

Read here to see how we increased our net worth by $100,000 in a year with a budget.

Benefits of a budget

Budgets are work, but worth investing your time in.  Here are a few benefits to planning and living with a budget.

Control over your money – you know where every penny is going, so you decide how it is spent and when.  Gone are the days of blindly swiping that credit card.

Gives you focus – If you have a goal you are trying to achieve, a budget will help you stay focused, because you will be diving deep into your finances.

Helps you understand your habits – Since you will be diving deep into your finances, you will start to see patterns in your spending, which indicates some of the patterns you have in spending.  I found that I loved Target maybe just a little too much.  It is amazing how you can walk out of there with just two bags and $80 poorer.  You may also notice how often you are eating out, and make changes to plan meals to cook at home.

Gives you options – Looking at a budget, you can start to prioritize and determine where you would like to cut down.  It makes it much easier to look for different options to help you reach your goals.


How do you write a budget?

BudgetStart with your income or money coming in after taxes.

Break your budget into categories…see below for what can be included in the budget.

Calculate your approximate expenses in each category.

Add up the totals of all categories.

Try to keep the total less than the amount of money coming in.


What should be included in a budget?

Here are some basic expenses and categories.

Home – mortgage, taxes, insurance, utilities, garbage, water, electricity, cable, Internet, Phone,

Cars – gas, oil, insurance, vehicle registration

Savings – Retirement, College savings, Other

Food – Grocery, Restaurants, School Lunch Accounts

Debts – Student Loans, Credit Card, etc.

Shopping – Clothes, Household supplies, etc.

Entertainment – Concerts, Movies, Etc.

Children Activities – sports, musical instruments, daycare, etc.

Insurance – Life, Health

Other Expenses

Sinking Funds – These are funds set up to budget for unexpected repairs, etc, that may come up .  You can add $100 to the house fund each month and it will continue to grow if you don’t use it.  For example, if you go 3 months without spending money you would have $300 saved up.  Then if  in month 4 you need to call the plumber, you can use that $300 to pay for the repairs.  It is best to have a sinking fund for some of your larger items or things that come up only one time a year, such as the house, car, vacations or holidays.

7 Keys to a Budget

Characteristics of a Successful Budget

  1.  Simple– Don’t make your budget too complex or you won’t be motivated to stick with it.  Keep fewer categories and put like items together.  I don’t separate clothes out from household goods, because these are not the areas I am focusing on.  Instead, I just have one shopping category.
  2. Flexible – If you need to increase in a category for a month, then your budget should be flexible enough to decrease in a separate category.  Sometimes I increase in one month and decrease in the next month.  For instance in the summer we see an increase in our entertainment budget since the kids are not in school, but we see a decrease in the cost of school lunch, and our natural gas bill.
  3. Savings included – There should always be a line item for savings.  Your ultimate goal should be to increase this category over time.
  4. Areas for Improvement – In every budget you should be able to see areas that you can decrease your spending.  You can then add what this extra to increase your savings. Areas that we have made adjustments in are cutting cable, and then working on our grocery bill to be less.
  5. Irregular expenses – Make sure that you know what expenses might be coming up, such as back to school supplies, or car registration renewal.  Although these expenses don’t happen every month, they can be planned and budgeted for.  This category would also include vacations, birthdays or holidays.
  6. Goals – A budget is not helpful if you are not working towards a goal.  You will be motivated as you see gains in areas that you are working on.  Otherwise a budget is just work.  Set goals for yourself and accomplish them.  Here is my 7 Day Guide to setting goals if you want more information.
  7. Continual Check Ins– Check in frequently on your budget.  When I started, I was looking at it a few times every week.  After a few months, I was able to scale back to just adjusting every week.  I now look at it a few times a month.  I also have enough past months of my budget that I can also look at it from a year perspective.  This helps see patterns and adjust the current budget.


Being on a budget can be stressful.  The first few months are a time to learn about yourself and your spending habits.  Take it slow and let it really sink in.  If you include all the characteristics of a successful budget, you should see results in under 6 months.

We saw our net worth increase by $100,000 by budgeting for one year.


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