How to Budget

Budgets are a necessary part of your personal finances. They only seem like a four letter word. Many people cringe when they think about looking at all of their bills, or seeing all their debt in one place. However, budgeting gives you something you wouldn’t expect–freedom from worry and peace of mind that you can manage whatever life throws your way financially.

So when a reader shared a question via email about budgeting I knew I needed to write a post about the basics. It’s not the first time I’ve had this question, and I know many people struggle with where to begin.

Here’s Kayla’s question:

My name is Kayla. I am so lost on what to do. I do not work I am in school (college) full time. My husband and I recently got married and with that I have gained 3 step children ages 10,7,and 3. He works as an iron worker and I have no idea where to begin a budget. Help me please I am young and never had to do this before but my bills are taking over I feel like I’m being drowned. Please help me!

Wife and mother of three girls with too many bills.

First of all congratulations on your family, Kayla, and thanks for your question.

It’s great that you’re going to college to provide a better life for your family and a career for yourself. Since you are in school full-time and a stepmom I’ll assume working part-time is out of the question, but if your budget is too tight it may be a necessity for at least a little while.

Let’s start at the beginning.

What is a budget?

A budget is simply a way to manage your money to make sure you are conscious of what you are spending. It starts simply enough with knowing how much bacon comes home, and how much you spend on bills, needs, and wants.

At the simplest form a budget is…
Income – Expenses

But typically a budget looks more like this….

Income – Retirement & Savings – Fixed & Variable Expenses – Financial Goal Funds – Wants = $0

First, Financial Goals

Dave Franco chart

To start you should sit down with your husband and talk about your financial goals-this will help you get on the same page financially and bring you closer together as a family. You have some goals that are already clear-finishing college, and providing for your family-but you should also consider what you’d like your life and finances to look like in 5, 10, and 20 years from now.

I refer to these as financial goal funds. This may be saving an emergency fund, paying off debt, saving for a home, or any number of goals. It can often be a blend of goals-but emergency savings should come first.

The Basics of Budgeting:

Budgets give you power over your finances. You know what you have coming in, and what your expenses are. You make room in the budget for wants by getting rid of some expenses you don’t care about. You consciously choose where your money should go. The power is with you and your husband to make choices. It may seem daunting, but it’s actually liberating to be in control of your money.

Once you have goals in place- you can use your budget to make your financial goals and dreams happen. Here’s what you need to get started.

  • recent paystubs
  • bills for the past 3 to 6 months
  • list of occasional, quarterly, or yearly expenses
  • list of debts–I know this one is scary, but it’s necessary
  • a pad of paper, pen and calculator–while using a spreadsheet is great for keeping track of your budget, it’s important to write it out to start

Depending on how often your husband is paid you can typically just make a simple budget that includes the following:

Monthly Income (after taxes-IE what he brings home on his paycheck)
– Savings
– Expenses (rent or mortgage, monthly bills like electric, debt (minimum payments, loan payments, etc.)
– Spending & financial goal funds

Here’s a sample budget:

$4,000 (Monthly income (after taxes))
– $600 (savings account)
– $1000 (mortgage payment including property taxes)
–  $200 (electricity)
–   $50 (cell phones)
–   $50 (cable)
–  $200 (car payment)
–  $100 (credit card payment)
– $600 (grocery budget)
– $300 (clothing and kids needs)
– $200 (fun money for husband and you-$100 each)
– $100 (family fun budget–movies, eating out, etc.)
– $200 (debt repayment)
– $400 (household repairs or to savings)

Note: this is a simplified budget-and your expenses are likely different, but the same principals apply.

A note for parents:
If you don’t have life insurance you should try to obtain policies for both of you. (read more How Much Life Insurance do I Need?)

You should also have a will for yourselves (consult a local lawyer for this) which will include information about guardianship for your children.

Health insurance is a necessary cost for families-if you don’t have health insurance through  work look into state care which may be available for free or at a discounted rate.

Savings First

If you have no savings that should be your first goal. Having at least a month’s expenses (note: not a month’s salary) to start would be great. If you have debt having a list of all your debts will help you know where to start paying off debt (I recommend starting with the lowest balance first to get you motivated).

If your expenses are more than your income you should look at every expense and see where you can save. For instance cutting the cable in order to save money each month. (read more at Cutting $17K in Expenses)

What advice would you share with Kayla?

More Resources

Check out my free printables page including a monthly bill checklist, debt tracker, and more.

Now that we’ve covered the basics consider reading more about budgeting, and personal finance.

For more info on how to budget check out these posts:

Living on One Income

Women and Money: Family Budgets

New Year, New Budget

Budgeting Bi-Weekly Pay

7 Habits for Highly Effective Budgeting

Living on One Income: One Family’s Process

Don’t miss a single post! Subscribe to my RSS feed or sign up to have my posts delivered to your email.

About Kelly

Kelly Whalen is the founder and editor of the Centsible Life blog. She started the blog 6 years ago as her family faced a mountain of debt. The blog became a resource to readers and a hub for everything you need in life for less. Kelly lives in the Philadelphia area with her superhero husband, 4 awesome kids, and one adorable dog. She still believes you can have it all....just not all at once.


  1. says

    This is excellent, Kelly. We’ve always had a budget, but are actually redoing it for a very special vacation next year. Like Melanie, I’ve got to do more work to teach my son how to budget and that money doesn’t come unlimited from the ATM machine.

  2. Melanie says

    Another excellent article, Kelly. Thanks for sharing this. We’ve always had a budget in place, but I find that it’s not something we’ve been actively teaching our kids. Do you have a post about teaching kids how to budget? I’ve thought about giving them a set amount of money each month or quarter (rather than a weekly allowance) and explaining what they’re responsible for paying. It kills me to watch them waste money, but I guess I’d rather have them learn their mistakes now instead of when they’re adults. :

    • says

      As a matter of fact  @Kellyology:twitter  shared some tips on teens and budgeting here(

      I have a post going up shortly (on another blog) about teaching kids the value of money. It’s definitely a challenge when you are on top of your financial goals since your kids may not understand the work that went into getting you there!  

      I think setting up a budget with them now is a great idea-like you said it’s important to let them make mistakes now versus as a young adult. The consequences are so much bigger as they get older.

  3. Jenny says

    I would also suggest that you have a “State of Our Union” at least twice a year, sometimes more. I got the idea from Katie @ Marriage Confessions (I can’t find the link to the post).  You get a baby sitter and you and the hubby go out to eat or somewhere you can be alone and talk about everything and anything. Your financial goals, your relationship, anything that might need to be talked about.  You should do it at least twice a year, so much can change in six months. For example, in January I was a temp and my husband was a grad student. We were renting a tiny house, broke and miserable. Since then, we both got new, permanent jobs, bought a house, are a little less broke and paid off the car.  So we need to sit and have another conversation about how we’re going to plan for the rest of the year. You don’t have to even do it that way.  

    My long rambling point is that once you have the budget, it’s not inflexible you still need to talk about it after it’s been initially put together. :) Once you have the budget it’s easier to adjust and plan, but it’s kind of fun, the whole process.  We have a very ambitious plan to pay off our house in 10 years, instead of 30, but we have a plan and it’s a starting point.

    Good luck and congratulations on your new family!


Share your thoughts!