Every family’s priorities, wants, and needs differ, so one single budgeting plan will not work for everyone. Learn one simple budgeting technique that can work for any family and download a free sample Microsoft Excel worksheet template to implement the strategy.
How to Budget Money
One way to develop a customized basic budget is to first determine the maximum amount a household can spend without incurring additional debt, then allocate that amount to typical expenses in order of importance.
Balance Monthly Income and Expenses
Follow these steps to balance monthly income and expenses:
- Calculate net spendable income by taking gross income from all sources (jobs, gifts, support payments, etc) and subtracting out federal and state income taxes. This will determine the maximum amount that can spent without incurring additional debt.
- List typical household expenses in order of importance. If necessary, consult a list of suggested expense categories.
- Indicate actual or estimated actual values beside each expense category.
- Starting at the top of the list, subtract each expense in order of importance until income has been used up (the balance is zero).
Tweak This Simple Budgeting Plan – Allow for Extra Monthly Expenses
The goal of this budgeting plan is to balance household monthly income and expenses. With this strategy, any costs that can’t be incurred without taking on additional debt shouldn't be in the household’s basic monthly budget. Only allow additional expenses into the budget if you make more money and/or spend less in an expense category ranked higher up on the list.
Learn How to Budget – Reduce Family Expenses & Budget Money Wisely
In the article How to be Frugal- Saving Money Advice, Amy Dunn (owner of the Our Frugal Journey website), shared frugal living tips and money saving ideas. Despite the fact that Amy lives a frugal lifestyle today, she said that her family has not always been frugal; they know what it is like to spend too much money.
In Amy’s own words, “While we have always been careful with our money, we have definitely become more frugal over the years. While we lived within our means and never had credit card debt, we were definitely big consumers. We ate out frequently and bought lots of ‘stuff.’ In contrast, we now save eating out for truly special occasions, and we have learned we can make do with way less.”
Download a Free Excel Budget Spreadsheet, Sample Worksheet Template
Anyone can learn how to budget like Amy did. Identify a household’s spending priorities and balance monthly income and expenses using the simple budgeting technique above. After a basic monthly budget has been established, families can adopt a frugal mindset and learn to live on less just like Amy’s family.
One way to get a jump-start on the budgeting process is to use a ready-made household budget spreadsheet template. Learn how to access free sample monthly budget templates in the article Personal Budget Spreadsheets for Microsoft Excel.
Lena Gott - Lena Gott is a Certified Public Accountant who gives practical financial advice to her readers.
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