Making a Budget You Can Actually Stick To

Are you still with me?

Amazing! So glad you made it this far! Are you ready to continue on the steps to create your budget and help you reach those financial goals you just set for yourself?

Here it is, the part you’ve been waiting for:

Making A Budget

Making a budget or a spending plan will be really simple now that you have done all the leg work to categorize your spending. 

Basic Budget Formula

Basic calculations comprise a budget; take your income and subtract expenses, spending & savings. With the zero-based budget method we learned earlier, the result of that equation should be zero. 

We recommend that you prioritize your savings before spending so you can practice paying yourself first. 

By Hand vs Digital Budgeting

Once again, you can choose whether you want to work on your budget by hand or complete it digitally.  

Here is where I can make the process much easier for you. Check out the Canadian Budget Planner, which includes the Budget Template, Spending Categories & Tracker and more!

If you prefer to work digitally, you can find a spreadsheet template which includes a zero-based budget template, net worth tracker, and bonus debt payoff spreadsheets. 

Making a Budget Monthly vs By Paycheck

Another personal choice is to decide between budgeting monthly or by paycheck. How often you get paid may be a deciding factor.  I would say most people get paid bi-weekly, but you may have an inconsistent income or get paid monthly like me. 

You can try both ways, decide what you like, or even do both. Create one overall monthly budget, then plan each pay cycle with its own budget.  You do you! 

Create Your Spending Plan.

YES! Let’s get to it. 

This is a first draft attempt at making a budget- so don’t be too critical; start writing and then revise. 

If you have one of my above budgeting bundles, the budget skeleton is already there for you. If you want to make your own, here is the general format you want to follow. 

At the top of the page, record your expected income. Under the income section, then comes your expenses.

We are going to practice paying ourselves first. That means before you go spending anything, you have already set aside money for your savings and investments. 

Write down your contributions to your savings goals (which you determined the monthly costs for in the Free Financial Goal Planner you filled out).

Then, list out all your expected bills for the month; next to the amount, add the date the bill is due.  Include here any minimum debt payments required each month.

For any bills that are variable costs (a different amount each month), use your estimates from your 3-month spending review (the one we completed earlier) to put down an average cost. 

Below that go the spending categories you already determined above and their estimated average spend. 

Now, to calculate, subtract every item from your total income. 

Congratulations, you completed the first draft of your budget. I hope this helped you realize that making a budget isn’t all that difficult. 

Are you spending less than you make?

If the above calculation of all of your expenses and planned spending subtracted from your expected income resulted in a negative number, you need to make some adjustments. 

Spending less than you make is the key habit to help you get out of debt and have enough money not only to spend on the things that are important to you but also to save for the future and invest! 

Are you a little over? or way over? 

Suppose you are just a little over the budget (spending more than you make). Small tweaks can help you refocus your spending habits on what brings you joy and cut back on the mindless spending that adds no value to you. 

If you are way over budget, evaluate what has caused this.  Go section by section to review each of the following:

• Financial goals and monthly contributions toward them
• Monthly bills and services in use
• Debt repayment amounts (Learn how to get debt-free faster)
• Spending categories

Where do you see room for change? Can you negotiate a monthly bill or lower an interest rate? Can you cut out or cut back on a service that is not essential? Can you reduce your monthly spending in one or two categories or eliminate a category altogether?  

Or alternatively – what are the ways you could make a bit more money each month? This could be as small as selling something on Facebook Marketplace or as big as changing jobs to a higher-paying one. 

Whatever it is – now that you have all this data and knowledge about your spending and financial position – it will be easier for you to make this change.  Making a budget now should be a whole lot easier!

Get your numbers right.

You want to tweak the numbers in the categories you control in the budget until your balance equals zero – you have given every dollar a job. 

As I mentioned before – this doesn’t mean you have to spend spend spend until there is nothing left.

A great tool in the budget is the Buffer or miscellaneous category.  Budgets are built by working on estimations, so there is always a chance we over or under-estimate our budget.

When you overestimate, a buffer is there to protect you.  For example, this could mean adding a $100 Buffer line to your budget.

If you are well under your budget, you can divert more of your income to your financial goals through sinking funds or investments. 

Rejig the budget category amounts until the balance is zero, and you are ready to go!

Track Your Spending

Now that you have your budget and best estimates of how much you think you will spend… surprise, you need to track what you spend.

Yes, every dollar.

Yes, on your debit, credit, and cash use.

And yes – at least for a few months.

It doesn’t have to be a forever thing – but it is a fantastic exercise to really understand your money habits and make sure you are on track toward the goals you set for yourself. 

Why it makes sense to start on paper

There are all sorts of apps for budgeting, and I’ve tried them all. It makes sense to begin your budget on paper, as when we write something out by hand, something in our brain makes it stickier. We pay more attention and can remember more when we have taken the time to write it out by hand. 

So yes, you can download your digital transaction records from your bank or credit card. But I strongly urge you to take just a few minutes a day at the end of the day – and write down anything you spent that day and assign it to one of your categories. 

Some budgeting tools come with spending tracker sheets – you can also use plain paper or your favourite notebook. 

Close Out Your Budget and Calculate the Category Spends 

OK! You have diligently tracked all your spending and reached the end of your first budgeting month.

To close out your budget, you will compare your budget with what you spent. Add up all the spending by category for the month and compare your bank statements to your budget. 

The Canadian Budget Planner’s budget sheet includes a column for you to add up what was spent and compare it to what was budgeted.

If you are budgeting by month rather than by pay period (and you get paid bi-weekly), I actually recommend you do this at the end of pay period 1 and pay period 2 as well so you can see how you are doing. It will show you how much of your monthly budget is still left to use – and you can adjust the next 2 weeks accordingly.

Review and Revise the Budget For Next Month.

Each month, you should reflect on what happened in the previous month compared with how you planned out your spending.  

A budget should never be static. It should be adjustable and change based on your experiences and as you improve your relationship with your money.

After you review your performance, you are ready to start making a budget for the next period and start again. 

Suppose you went over budget; it’s not a failure; view it as a learning opportunity. Don’t let any small hiccups along the way derail your process. Making a budget is a trial-and-error process. It should be iterative and change from time to time. 

You are practicing to improve, not to be perfect. You want to be better this month than last, but holding yourself to perfection standards will not help in the journey you are on. Give yourself some grace, and know that each time you try, you are getting a little bit better!

If this post has been helpful, please share it with a friend who would benefit from reading it!

Remember to download your Free Financial Goal Planner to help you get started! I know this is a lot, but don’t get discouraged. You got this!