How To Set Up a Budget


Happy New Year! Tis the season for New Year resolutions in the food, finance, and fitness areas (conveniently all the topics I write about at Budget for Health!). As I look back at all of the financial goals we accomplished in 2012 it makes me excited about helping others pursue and achieve financial freedom in 2013. The biggest factor in our success was setting up a tangible budget. Not a “we should watch how much we spend on groceries next month” kind of budget. I’m talking about a real budget with real numbers that will show spending trends and track our expenses.

When Dave and I got married in May 2010, we read Dave Ramsey’s Total Money Makeover and set up our own version of a monthly cash flow plan in Microsoft Excel so we could set up formulas to add and subtract where needed. We first determined an allowance for each “fixed” category that would be paid every month and then the “variable” categories.

Fixed: tithe, student loans, taxes, rent, health insurance, phone bills
Variable: entertainment, groceries, clothes, vacation savings, utilities, gifts

Here’s how a sample month looks (I’ll use random numbers because the cost of living varies so much from place to place):

Income: $4,500
Fixed expenses:

Taxes (15%): $675
Tithe: $450
Rent: $850
Phone: $100
Retirement: $250
Health Insurance: $200
Student Loans: $1200

Remaining: $775
Variable expenses:

Groceries: $300
Entertainment: $100
Vacation: $100
Utilities: $25
Gifts: $50
Gym membership: $100
Miscellaneous: $100

We tweaked the budget to allocate every dollar and finally agreed upon a set budget to live on. We revisit our budget frequently to adjust areas we’re overspending and reallocate the money accordingly. My husband and I had a pretty strict budget when we were paying off student loans so that we could throw every extra penny we could toward them. Since paying them off we’ve cut ourselves some slack and allowed a little more elbow room in categories like entertainment or clothing.

This method works for us but I know that just like diet and exercise there is no cookie-cutter formula that can be used by everyone. I recommend finding a method that works for you, whether it’s a weekly, monthly, or quarterly budget. January is the time for fresh starts so why not get started on managing your money? The ultimate goal is to control your money so it doesn’t control you!

What methods have worked to help you budget wisely?

This has been a guest post from Jessica. She is a Registered Dietitian and shares practical, useful tips on food, fitness, and finance. Be sure to subscribe to her blog, Budget For Health.

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