The first step to managing your finances and saving money is to create a budget. Before you start out, you need to determine what your financial goals are (e.g. paying off debt, starting a savings, or simply because you have limited income and need to learn to live within your means. From there, you will need to ascertain the duration and amount of the budget. Is it short term? Long term? Are you specifically saving $2,000 for a vacation?

  1. Figure out your total monthly income. Include all sources of income. This can be somewhat tricky to do if you don’t have a steady income from month to month. If that is the case, use your average monthly income.
  2. Make a list of ALL your bills and expenses (e.g. gas, food).  Are you splitting the bills with a roommate or significant other? Then only include your half of the bills.
  3. Think about all your purchases for the month and think of ways to reduce those expenditures. If you don’t keep track of all your purchases, then you should review your bank and/or credit card statements for the past 6 months.
    • The easiest way to reduce spending is to spend less on groceries by learning to be a savvy shopper. Try reducing your grocery budget by 20% and see if that is manageable. It’s really trial and error here. It took a month for my family to find our ideal grocery budget ($200 a month).
    • Do you REALLY need Netflix, a $50 hair cut, new brand name clothes or to eat out 3-4 times a month?  Cancel netflix. Don’t spend more than $15 on a hair cut, and shop at thrift stores for brand name clothes at 90% less. Save eating out for special occasions or cut back to once a month. If you think about it, I’m sure there are several items on your list that you can do without or at least reduce.
    • Switch your cell phone service to a cheaper company. Cricket, Sprint and T-Mobile offer some good deals.
    • Save money on your electric bill in the summer by enrolling in an energy savings program and/or using less electricity (e.g. during the day, you can use natural lighting from windows instead of turning on lamps and turn off lights/tv/computers/etc. when you aren’t using them).
    • Leave room in your budget to money to save. Even if its only $20 a month. Every bit will add up and it is essential to have a savings because you never know whats going to happen. You have to be prepared.
    • Don’t forget to factor in irregular expenses to your budget. Ex: car maintenance, holiday gifts, property taxes, home owner association fees, doctor visits and more. What I do is factor in a miscellaneous expense every month to account for these things.
  4. Finally, add up all those expenses and subtract them from your monthly income. You should have money left over to add to savings for emergencies (and maybe a little left over to splurge ;)!


Your budget is dynamic. It will change from time to time. It is important to review it every month and to keep track of all your spending or else you will find yourself overspending! I know it sounds time-consuming and requires a lot of self-discipline, but it will be worth the effort to reach your goals and have some financial freedom!

This post is just a brief introduction to the topic of budgets, just enough to get you started. Soon, I will create a budget sheet and planner to help save you some time! Also, there are whole books and websites devoted to the art of budgeting. I recommend that you research the topic thoroughly. There are a lot of great tips out there to help you stay on budget.

To that end, I have included some useful resources to help you on your journey financial success:


Tools & Apps

  • Level – tracks your discretionary spending.
  • YNAB – this is a paid software program ($50) that is very highly recommended by everyone. It makes analyzing and customizing your budget easy.

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