My Guide to Being on a Budget

Wednesday, June 26, 2013

This post was last updated September 28, 2018

A step by step guide to being on a budget

You know the feeling of debt, right? That horrible weight that's always on your shoulders because you owe a lot of money, and have no idea how to pay it all back because you currently live paycheck to paycheck. It seems to be the norm now so it's really not that weird is it? Debt is normal these days..... Being debt free isn't. And if you're reading this post that's about to change. My book, Fixing Your Finances, can help change everything for you and one of the parts of fixing your finances is being on budget. And if you're looking for a group of folks doing the exact same thing you're about to do, look no further than my Fixing Your Finances Facebook group.

AND big news! 
 Enroll in my Fixing Your Finances e-course for the sale price and you'll learn everything you need to in order to reduce your debt and become debt free, build up a savings fund, stop using or safely use credit cards, and live on a balanced budget where you can actually control your spending.  I promise my course WILL help you.
Fixing Your Finances Book Cover 
I used to be terrible with money and it all started with my credit cards. I had used them for many years to cover emergency expenses which actually weren't emergencies. I needed to put groceries on a credit card because somehow I didn't have enough money left in my paycheck most weeks to get them. I thought it was because I didn't make enough but really it was because I wasn't managing my money the right way. I always thought being on a budget meant you couldn't spend money. In reality, it means you manage HOW you spend your money in a very disciplined manner.
Cash Envelope System

See that adorable Filofax cash envelope system above? I made that when I finally was getting on the right track, and I am now debt free because I paid off my credit cards and got into MUCH better financial shape. In fact, my credit score is 832 the last time I checked.

I have been on this system for years and I have way less financial stress than I used to. I even have some budget spreadsheets you can get for free here.

So without further ado I present the Ask Away Guide to Being on A Budget!


An excel speadsheet used to track debt pay down
Note: These are not actual amounts I owe, this is an example.

Make a list of:

- each debt you pay down each month
- the due date
- minimum payment
- total amount you owe

Then put it all into an excel spreadsheet like I did in the above example. You can get my Downloadable Debt Pay Down Tracker for FREE here.  I set up formulas to subtract my payment and show what I owe in the next month. The only thing this spreadsheet doesn't show is finance rates, so just know that your actual amounts owed may differ when you factor in that charge.
 It may be worth taking a look online to see how personal loan interest rates are calculated to give you a better understanding and allow you to factor in interest when creating your budget.


Look at where your money has been going over the last few months and then figure out what categories you will need money for each month. Your debt is generally a fixed expense each month that can only be decreased as you pay it down.

So make a list of your expenses such as:
- Groceries
- Dining Out
- Fun money (movies, tickets to events, etc.)
- Clothing
- Pet Supplies
- Medical expenses (medical bills, prescriptions, co-pays)
- Vet Appointments
- Car expenses (oil changes, car repairs, inspection, registration)
- Gas for your vehicle
- Miscellaneous (random things here and there like maybe a coupon holder, new pens for at home, etc.)

You may need to print out a few bank statements and look at all your expenses and decide what category each one is.

Look at what you spent on them and figure out which ones can actually be thrown out.

For example - You NEEDED an oil change for $40 last month, but you didn't need the decorative car mats for $50 since your regular car mats are just fine. So add up in each category the expenses that you NEEDED.

This will leave you with a ballpark amount of money that you will put towards each category on a monthly basis.


an excel spreadsheet showing a budget
Note: These are not my actual expense amounts. They are just an example.

In order to make a budget you will need to first figure out your monthly income. This would be the money you make on a REGULAR set basis - like your paycheck.

Then, you need to list the categories from Step 2, and figure out how much to designate to each category every month. Add up the fixed expenses from Step 1 (credit card payments and car payments that are considered debt) and list them in the CREDIT CARD or DEBT category.

*It might be difficult to figure out how much to designate to each category, and you will find that when starting out, you'll end up changing the amounts every month until you find a number you are comfortable with. That's NORMAL.

Here is a (MADE UP) example of monthly amounts and categories:
Groceries - 300
Fun - 80
Savings - 40
Debt - 100 (yea right, this is just going from the above example)
Vet - 40
Car & Insurance - 100
Dining Out - 20
Miscellaneous - 20
Pet Supplies - 60
Medical - 60
Rent - 500
Cell - 80
Gas - 100
Parking - 155 (yes, it's extremely expensive to have a safe parking spot for work in the city)

I also included fixed expenses such as my phone bill, and my car insurance (which I lump into the Car Category in general).

Put all of these categories into an excel spreadsheet as a budget.

You can set up a formula so that your monthly fixed expenses, and your budget category expenses all get subtracted from your monthly income, and it will show you what's leftover and whether it's negative or positive. You want to make sure you play around with the numbers until that Difference = $0. Yes, I'm serious. You want to account for EVERY SINGLE DOLLAR that goes into your bank account, so that you have no room for spending carelessly.

You can get my FREE Budget Template here.


"But, what if something out of the blue comes up that doesn't have a category?"
Well, if it's an emergency, then Step 5 will explain why you are covered. And if it's a category you didn't make up... then you may need to add it to your spreadsheet and figure out an amount to designate towards it each month. A great example is computer expenses. As a blogger it's a tragedy when my computer crashes and it can be a big expense to get fixed so I decided to designate $10 a paycheck to a computer fund. I may not use it for an entire year but it sure is nice to have. This kind of acts as a mini savings instead of just an envelope category.

You'll learn more in the next 2 steps...

"What if I have an expense that I pay online directly from my bank account and I can't leave $0 in? "
I have expenses like that too and instead of leaving $0 in your bank account, just leave the amount that you will need for your bills.


Cash envelope system with categories
You can find an upclose look at this envelope system here.

This is the fun part, at least for me because I love being organized. And instead of just using typical envelopes I opted to get a nice little organizer from Target and I eventually made an even cuter envelope system using a Filofax organizer, which you can see here.

I made tabs for each category that I deposit cash into every payday. No more spending with my debit card because it was a bad habit for me. Cash makes you way frugal and way more apprehensive to give it away. This means you will think TWICE. I can tell you first hand that this WORKS!!!!

On payday, I get cash from the bank and I put it into each category. I even have little pieces of paper in each pocket of my envelope system to track how much I put it in each month and when, and what I spent it on (including the receipts).

"What if I have money left in the envelopes at the end of the month?"
Well, you can keep it in there and that way you will always have a mini savings for each category. Or if you want to move it to another category go ahead. This is a great part of the system because you can do whatever you need to with it. Whatever works for you - no rules!

"If I am short in one category, can I take from another?"
This is a tricky one and generally I don't let myself. But sometimes when something happens like say my bill for a dinner with friends is over the amount I have in my Dining Out category. In this case I might grab from the Fun category because technically dining out IS fun.

But other than that, if I don't have the money in the clothing category for the shirt I want, even if I'm $5 short, I don't get it.... that's all part of the discipline process. And you know what? I'm still alive and thriving even though I never got the awesome shirt I loved. In fact, I end up forgetting about most things by the time I get home.

5. Build an Emergency Savings Fund

An ESF (Emergency Savings Fund) is the fund that you can tap into for emergencies such as but not limited to:

Expensive Car Repair
Medical Emergency
Speeding Ticket
An Emergency Home Repair

The beautiful thing about it is that after you tap into your category for that type of expense, and you still don't have enough money, you ALWAYS have your emergency fund.

There are 2 golden rules to know about the ESF:

1. You always want to have AT LEAST $500-$1,000 in your ESF.

2. You ALWAYS replenish it after you take from it and you ONLY take from it when it's an EMERGENCY.

An ESF is NOT to be used for these NON emergencies:
A purse/pair of shoes/shirt you want but can't afford
A fund for splurging on a new HDTV
Bar Money

"I live paycheck to paycheck, there's no way I can come up with $500 for an emergency fund within a few weeks, NO WAY!"
That's what I said the second I heard Dave Ramsey say this. And then mid thought, he interrupted with something along the lines of "If your child (in my case my dogs) needed an expensive vaccination and their life depended on it, and they would not survive if they don't get this shot with a week, you WOULD find a way to get/make extra money for that shot, wouldn't you?" I answered out loud "YES!". So this emergency fund is no different.


In order to come up with $500 for an emergency fund there are several things you can do... and I did all of these:
- sell things on ebay, Craigslist, yard sales, pawn shop
- sign up for survey sites (legit online survey sites that I posted about here )
- Get a second job or side job (I have my blog) but you can always Uber, do Rover, or any kind of gig you can find.
- Limit your fun/luxury expenses for a month (no pedicures or fun money, no dining out)

I went through my closet and sold clothes, I thought twice about every piece of furniture I owned and ended up selling a couple things via Facebook Yard Sale groups, and I sold large items such as Kitchen appliances on Craigslist. All the money I made went directly into my emergency savings fund.

I signed up to do sponsored campaigns on my blog to make extra income to go directly towards my emergency fund.

I even cut back on my fun money for a couple months to come up with the rest of what I needed in order to have $500 in my ESF.

You have NO IDEA how amazing it feels to look at my bank account online and see $500 in an emergency fund. Actually I have more than that because I have money automatically put in it from my paycheck every 2 weeks!

Build up your ESF first BEFORE you start paying down debts!

Once you have your emergency fund, you won't have to worry about using your credit cards for emergencies" so just pay the minimum payments on your debt and credit cards until your ESF is full.


Like I said before - the mini savings accounts are wonderful with the envelope system. You can make them temporarily and adjust your budget to include them. For instance, if you need spending money for a vacation planned for the end of the year, putting $20 a paycheck into the Vacation Spending Money savings is a GREAT IDEA. 

I weighed the benefits of a pet emergency fund vs. pet insurance and it's more sensible for me to put money aside each paycheck in my vet fund.

**Side note: To get more for your money when you use spending money for trips - ask yourself DO I REALLY NEED THIS?


I know, it's hard to stop the things you are used to but trust me, it's possible! Stop going out so much and eating out so much, stop doing luxuries that cost you money... and if you can't stop them at least do them less often.

Some of the ways I cut back are:
- I purchased a $5 kit from Walmart that had all the scraper tools and files that they use in a salon for a pedicure, and I now do manis and pedis for myself. This saves me at least $50 a month.

- Use coupons and always search for discounts at before you order something from a website.

- Eat less - opt for healthy meals and healthy snacks instead of tons of processed foods as snacks that you munch on in front of the TV late at night.

- Stop buying so much of the same stuff! Where what you have, do your makeup with what you have, and eat what you have before you go buy more. (This is also part of being more of a minimalist)

- Cut back on bills by going through them one by one and seeing if you can lower your cell phone minutes or data package (If you have Verizon, contact this guy who hooked me up with great deals on my bill - say I sent ya! ), downgrade your cable plan, save money on your electric by turning your thermostat down a degree (or up)
- Instead of meeting friends for dinner and drinks, invite them over, make cocktails, and have everyone bring an appetizer and then eat and drink on your patio.
- Attend local events instead of national events. Local BBQ's at vineyards, and local street fairs, local car shows, are much cheaper than going to a big fancy car show, a concert, or going to a huge amusement park numerous times each month.


I put all of my credit cards in my safe right away. No need to have them, because if my ESF is full than I can always use that instead of credit. I cancelled and cut up a few of my cards over the last year (1 every 6 months).

The only thing I use my debit card for is Gas since I don't want to pay with cash each time at the gas station, so instead of a zero balance in my bank account, I leave money in for the bills that get taken out of the account and money for gas.

Again, you probably can't pay your bills in cash so that's why you can leave the designate amount for each bill in your bank account as well.

Example - My phone bill is $80 a month so every payday I actually transfer $40 to a savings account that I labeled "Bills". Then when it's time to pay the $80 bill I make sure I transfer $80 back to checking.

And if you insist that you MUST build your credit score up by using your credit cards..see what Dave Ramsey has to say about that... it's okay if you literally make a purchase, then pay it off three days later... but do NOT spend beyond your allowance based on what you have in your envelope for that category.


Do all of the things from step 6 to get money for your credit cards. Pay the minimum on all, except your lowest balance card. That way, you pay it down sooner, and feel more accomplished. So if you come up with $50 dollars a month that you have leftover in your budget when you try to zero down the balance, apply that to your debt payments.... in addition to what you were already paying as your minimum payment. Then when that cards paid off... you take the $50 plus the minimum payment on the card you paid off (say it's $25) so that's $75, and you apply that to the minimum payment on another card. It's called a debt snowball.

I apply any extra money I can to my debts. I sell stuff all the time, I put gift money towards my debt, I sold DVDs and CDs on Music Magpie to get extra money. I go at it so hardcore, and if I have extra money in my FUN envelope at the end of the month, sometimes I even put that towards my debt!

Remember, the sooner you get money together to fill your emergency fund, the sooner you can put any future extra income towards your debt!

10. SAVE

Make sure that after you pay off your debts (or even while you are paying them off) you make sure you put money aside in a savings. You can have it in the same savings fund as your ESF, or a different one. I have $40 a month that goes into my ESF so even when I hit the $500 mark, money still kept going in there.

After a few years of chipping away at it - this finally paid off and I am DEBT FREE and you can read about how I did it here. still working on saving and paying down my debts but I am doing a great job.

Here was my timeline:
August 2012 - Started budgeting
December 2012- Paid my car off

January 2013- Used what I paid in car payments before to build up ESF right away
February 2013 - Paid store credit card off
March 2013- Paid another store credit card off
April 2015 - Became Debt Free!
May 2015 - Bought a house with my boyfriend (now my husband

Make sure you sign up for your free spreadsheets here, purchase my book, Fixing Your Finances and join my Facebook Group!

Guide to being on a budget


  1. Thank you sooo much for this post!! I've been in that vicious cycle my whole life and I've been really overwhelmed and didn't really understand what all needed to be done to get where I need to be. I know I have to make a budget, but I didn't really know how to stick to it. You provided so much good information here and I'm really excited to get started! I'm also going to check out Dave Ramsey's books as well. Thanks again! =)

  2. Just found this post...BRB, going to go read everything you've ever written. This is, AMAZING!! I needed to read this, it was just what I was searching for. Straight to the point but I love how personal it is.

  3. What if I just "purchased" a 2012 car and am planning to use it as our family car for as long as it lasts? There is no way I can pay it off in just a few months or even a few years really. I have small payments which is great but I know I read in part of Dave Ramsey's book to get rid of the car if I can't pay it off quickly but honestly I don't trust anything older right now to trade it in for...?

    1. I know, and i dont agree with getting rid of it because honestly you need it lol. My car had small payments too and i paid it off a year early, so just plug away at it. Sometimes you have to break the "rules" no worries@!

    2. you could always pay more towards the car than the minimum payment if you have the "extra" cash so to speak.

  4. Thanks so much for this post!!! This is going to help reduce the stress level in my life by at least 50%!

  5. I love your blog and all the different stuff you cover!

    I like your budgeting info and step by step instructions! This is an awesome resource! I have been adapting different methods myself. And I love love love info from Gail Vaz-Oxlade. Have you read any of her stuff?

    I like some of Dave Ramsey's stuff but he can go a little overboard. Also, I would recommend paying down debts with the highest interest rate first, as opposed to the smallest amount. You save money overall, and that good feeling won't last very long.

    I'm off to explore more of your work! Thanks for the awesomeness!!


  6. Most people pay by checks so they have a receipt..why making all these cash envelopes? I can understand for eating out and for gas for car, haircuts,etc. I even pay by check for my groceries 90% of the time..I have no idea what we will spend in medications because not all prescriptions cost the same; same for groceries..We tend to eat out more than once a week some weeks..but that's our only pleasure now days..I bowl and spend an average of $13 each week..some months have more weeks then others, so would you budget for the largest number of weeks? I know that if I were to plan our meals, and go shopping without my husband, I would spend a lot less but that is not always possible. Where would you include postage stamps,etc? What about computer supplies(printer cartridges)? How often you buy them depends on how much you print out..Our church has offered the Dave Ramsey Classes and they are well attended...all ages..I think this is the second time it has been offered.

    There is a lot about this system that i don't understand. I've checked his books out of library several times and it's still not edged in my brain. We found that eating dinner out is more costly than going out to lunch and I'm going to suggest we go out to breakfast more but I know DH will kick on that, I don't want to be eating breakfast at 10 am..He's up by 7:30 but has to drink his 1 c. of coffee, read the newspaper, then shower,etc. and half the morning is over by the time he does all that.

    1. The cash thing is because spending money in cash makes your brain react in a similar way as it does to pain, therefore you are much more careful about what you spend.

  7. I'm wanting to start this system, but I'm just a little confused on how to begin. I've figured out how much I spend on each thing each month, and I've made myself an accordion folder to organize my money, now, do I just start putting money in there after each paycheck? I'm confused... :/

  8. Oh my goodness I want that envelope. Where did you get it? Seems perfect for smart storage of money and keeping it organized.

  9. Love that envelope, exactly what I need! Where did you get that magnificent thing?!

  10. This works great for the full-time working adult, but what about the part-time working college student.. How well do you think this would work for us? How could it be changed to fit our college life style better?

  11. The beautiful thing about this system is that it can be tailored to YOU and YOUR needs. For example, I am a single, 25 yo woman. I don't feel the need to have multiple spending categories as some weeks I grocery shop and others I don't. Also there are many things I don't have to purchase for months at a time. I allow myself $100 per week (my week runs Friday - Thursday so I can start on pay day) for all spending. That includes groceries, eating out, bar money, toiletries, and anything else I may want. All other bills are paid from my checking and gas is paid on a CC that gets paid off every single month so there is no interest but I earn rewards. There have been weeks where I just had to have that new purse at the beginning of my week and I had to get creative with the pantry at the end because I didn't leave enough for groceries. The beauty of this system is to make it work for you. If you need 15 categories or none (like me) it still works if you have the self control to make it work.

  12. This would be brilliant with a real income , if one wasnt so frugal in the first place with minimum income and 0 credit cards , only the bank card that will not spend past what i have in it.

  13. the only thing I disagree with is actually cancelling credit cards after you pay them off. Part of credit score assessments are based on the average length of time of all credit lines open, for example, if you have opened a lot of credit cards in the last year, it might indicate to bankers that you need extra cash or are getting in over your head, so if you close a credit card that has been opened for ten years, you just did your credit score an inservice because your aveage life of open accounts has just been lowered. Also, another measure of a credit score is the percentage of available credit you use. So if you cancel a credit card line, you're actually increasing the percentage of debt/credit available and again hurting your overall credit score.

  14. Does anyone have any advice on how to budget when you don't necessarily have a monthly income? For example, my husband and I own a farm, not a dairy farm where you get a steady paycheck, but a beef/crop farm where money is so sporadic. I'm trying to find a way to set up a budget, but it's been difficult for me to think of a good way to do so since we don't have a sure amount of money to plan around. Some checks are big, and some checks are small. Sometimes we get a lot of money in one month, and other months we receive nothing. Any advice is greatly appreciated! :) Thanks!! -Jen

    1. Take last year's annual income and divide by 12. On big check months bank the difference. In lean months draw from thus savings account to get up to the calculated monthly average. It will not always work out, but it cut our number if lean months dramatically. After year one, we kept a little roll over to cover lean months early in our cycle and used the rest to pay down debt. It worked for us. Consider giving it a try.

    2. Thank you for your response! Your idea sounds very smart and practical. Now I just have to get my husband on board! :) Thanks again!!

  15. Holy Smokes... Your GOOD!!! I saw your blog and scammed threw a post or two I will have to come back later and read more. I am so jealousy I wish I had your sense of saving.

  16. I saw that you got your little organizer from Target. I would love to get a similar or even the exact one. If i were to go to Target where would I find it at? Or does the organizer have a name? BTW I love your blog!

  17. Was wondering if you had a templates in excel for the budgeting? Or in step one if you could advise me in how to set up the accruing months after the july! Thanks for your help!

  18. Hi I was wondering if you had any templates for your excel budgeting?

    1. I do not. but if you send me an email I can probably make something up for you! :)

    2. I can't seem to get the entire post and the "Read More" link doesn't work. Can you help me so I can read your entire post?

  19. Where can I find the envelope that's in the picture? Or something similar? My email address is Thank you.

  20. I read David Ramsey's book and I love the idea of the cash envelope but I would be terrified that I would be targeted and robbed or that I would lose large bills. Do you literally just use the cash envelope the same way that you would a wallet and pay as you go? Don't you get nervous? My email is

    1. I honestly put my money away in a safe when the categories get too high. so i dont carry around tons and tons of cash .

  21. Hi,I really enjoyed reading your post Great Job!My problem is I read so much about budgeting and saving but never put it into practice.My husband & I recently got married & we have no debt just basic expenses such as utilities,food,netflix etc.However we have noticed we tend to overspend in the groceries & dining out/take out category.How do we lower our expenses in these categories...please help!


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