Author Topic: How do you make a budget?  (Read 4388 times)


  • 5 O'Clock Shadow
  • *
  • Posts: 34
How do you make a budget?
« on: March 07, 2018, 02:33:09 PM »
I recently posted a case study and from the replies I got, I have realised I need to make a proper budget. And also track my expenses better.

The way I do my budget at the moment is in excel and I basically start with our salaries and then minus off what I think we'll spend each week. Past "bills"* and "petrol", none of the expenses categories are very well defined and if something unexpected comes up, I just add it in to the spreadsheet and as long as we don't go negative at the end of the month (which we never do), I leave it and don't take from anywhere else.

I'm not sure the best way to go about being more specific. I'm in the UK so YNAB doesn't really work for me because it doesn't connect to my bank accounts, and I haven't found anything equivalent. I'm pretty happy to manually update a spreadsheet, but how do you guys make sure you account for everything you need to?

I've gone back through our accounts for Jan and Feb this year, which is probably a good starting point, but unfortunately we had a lot of cash withdrawals so i don't really know what we spent money on. We've agreed we will spend on card as much as possible in March and April, so by the end of April I should have a fairly good idea of what we're spending and use that as a basis for a budget. But what to do in the meantime?

* Note, I have a separate account and spreadsheet for bills and I actually know exactly what goes in and out of that account each month.


  • Pencil Stache
  • ****
  • Posts: 931
Re: How do you make a budget?
« Reply #1 on: March 07, 2018, 02:37:36 PM »
I use credit cards for 99% of my spending, making it easy to see what I spent where. My budget spreadsheet is broken into categories and, more importantly, includes columns for what I "expect" to spend and what I "actually" do spend. This allows me to adjust my budget to reflect reality OR to adjust my spending to reflect my budget.

This is a blank version of my budget, all categories can be renamed.


  • 5 O'Clock Shadow
  • *
  • Posts: 34
Re: How do you make a budget?
« Reply #2 on: March 07, 2018, 02:42:52 PM »
Oh, that is a thing of beauty! Thanks for sharing! Do you set your budget monthly? How far ahead do you plan?


  • Pencil Stache
  • ****
  • Posts: 931
Re: How do you make a budget?
« Reply #3 on: March 07, 2018, 02:51:14 PM »
Oh, that is a thing of beauty! Thanks for sharing! Do you set your budget monthly? How far ahead do you plan?

When I was starting out budgeting I did it every month. I'd set the following month's budget and reconcile the previous month's budget at the same time. These days I'm a little more lax as my spending is quite predictable, so I just check it every few months to make sure I'm not getting off track.


  • Handlebar Stache
  • *****
  • Posts: 1697
  • Age: 45
  • Location: Dallas TX
    • SWAMI
Re: How do you make a budget?
« Reply #4 on: March 07, 2018, 03:03:04 PM »
Honestly I don't and never have 'set a budget'. Instead we work hard to optimize spending habits. It then literally becomes a habit. I don't need a tool or a budget to tell me (for instance) my target utility bill is $xxx this month. We exercise our frugality muscles and the result is that the utility bill is optimized.

I do monitor our spending mostly using credit card tools; that's about it.

when someone brings up budgets I always think of the old Dilbert cartoon where Wally has to injure an intern to meet their monthly safety target.

Dollar Slice

  • Walrus Stache
  • *******
  • Posts: 8781
  • Age: 45
  • Location: New York City
Re: How do you make a budget?
« Reply #5 on: March 07, 2018, 03:12:32 PM »
It takes a while to get a budget really dialed in, and everyone's preferences are a little different. It's OK to have very broad categories (like "bills" and "petrol" and "everything else") if you are happy with your spending levels. But if you are trying to make cuts or adjustments, track what you find helpful to track - for example, I have a separate "concert tickets" category because live jazz is my favorite thing and I want to keep a close eye on my spending there.

In re: unexpected expenses. Some people just keep an emergency fund and call it a day, but you can also foresee a lot of them and create a sinking fund if you feel better about it that way. E.g., you could put aside $100 a month for future car repairs or vet bills or whatever, and then your "unexpected expense" is no longer unexpected, and your budget is more accurate and predictable. This method is (psychologically) helpful for me - I feel like I was prepared and saved up for it rather than thinking "oh no! I'm forced to pull money out of savings for an emergency! drama! sadness!"

And it's OK to guess and be a little bit wrong at first. Say you had $200 in cash expenditures in Jan and Feb, it's OK to just say "I think it's about 50% fast food and cafes, 25% pubs, and 25% taxis" (or whatever is likely to be true for you). You won't be exactly right, but you'll be pretty close, and you can adjust the budget categories after a couple more months of tracking. Budgets are not set in stone... your life will change and so will your budgets. For a lot of people, the act of making a budget changes your budget, because you see how much you're spending on something you don't value and vow to cut back.

Lady SA

  • Pencil Stache
  • ****
  • Posts: 538
  • Age: 30
  • Location: Midwest
Re: How do you make a budget?
« Reply #6 on: March 07, 2018, 03:44:35 PM »
There are 2 different kinds of budgets. An aspirational/ideal budget (or maybe planning your spending), and a log of your actual spending.

I use mint to track my actual spending, which then informs are more and more accurate version of my ideal budget. I think a UK equivalent of mint is Money Dashboard or Buxfer? Not sure.

Mint is hooked up to all my accounts and credit cards, and records all my transactions. I can go in and categorize the transactions (ie groceries or entertainment or sports or household goods).

Every year, I look back on the last 12 months and see what I spent in each category/my total spending. I keep track of this yearly spending in a separate tab, and I add a new column every year to see how our spending is changing and compare against our aspirational budget (how close did we get? Usually within $1-200 or so).

Then to actually set my aspirational budget for the year, I do a very unscientific smerging of these recorded numbers and what I think I *should* be spending in that category this year and also our historical average in that category. For example, last year we spent $5200 on groceries, but that was us buying meat every week and off-season fruits. We set a goal to get this down to $5100 this year, so I set our grocery budget category as $5100/12=$425 per month. The trick is that I know our spending habits (historical records), so I budget something reasonable/close to our actual spending. I generally know what is reasonable and what is too much of a stretch. So maybe aspirational budget isn't quite right, its more like "planned spending, or extremely reasonable goal budget that I should be hitting 99% of the time"

Then I put this aspirational budget into Mint, just because it is easy to see at a glance how our monthly actual spending is doing against our planned spending.

Anyway, the tl;dr version of my answer is: I think you need to keep an accurate log of your spending, every dollar, before you can accurately plan how you want to spend. Mint and it's equivalents are nice because they do this automatically, but I know plenty of people who log their spending in a spreadsheet.

Dr Kidstache

  • Bristles
  • ***
  • Posts: 474
Re: How do you make a budget?
« Reply #7 on: March 07, 2018, 04:55:33 PM »
How about Pear Budget (

I used it years ago before YNAB became available. It's available as a free spreadsheet. It got me hooked on budgeting and then YNAB took it to the next level. Regardless of the method you use, I encourage you to use YNAB's rules of budgeting. Simple but insanely effective.


  • Pencil Stache
  • ****
  • Posts: 611
Re: How do you make a budget?
« Reply #8 on: March 07, 2018, 05:30:48 PM »
I'll second YNAB.  Super good software.  I've used it for 5 years now.  I can't describe how well the tool works.  It's easier just to use it.  I know you're in the UK and it doesn't sync with your accounts.  But seriously give it a try by manually entering everything in for a month or two.  It doesn't take that long, and is a good exercise - especially when you're getting started.


  • Handlebar Stache
  • *****
  • Posts: 1784
  • Location: SE PA
Re: How do you make a budget?
« Reply #9 on: March 07, 2018, 08:08:05 PM »
I'm a YNAB 4 user and everything is manual input.  I love it.   I do want to move to something else as it is no longer supported since the company moved to a SaaS revenue model.  But if you are willing to pay for the SaaS version, I say go for it w/ manual input.


  • Walrus Stache
  • *******
  • Posts: 7271
  • Age: 1
  • Location: Earth
  • K Thnx Bye
Re: How do you make a budget?
« Reply #10 on: March 08, 2018, 07:48:54 AM »
I tracked spending for a year, then took a stab at roughly what my numbers would average out to on a monthly basis.

Now I track spending throughout the month, and pull in the reins if I am above my projections on certain things. Large purchases that fluctuate throughout the year (6 month car ins. premium, taxes, etc) I plan for and it is reflected in my spreadsheet.

I also borrow from categories to make up for spending more in other areas.

TLDR - I just track it, without paying too much attention to categories as long as at the end of the year I am around my goal. YMMV


  • Walrus Stache
  • *******
  • Posts: 8164
  • Location: Norway
Re: How do you make a budget?
« Reply #11 on: March 08, 2018, 08:16:14 AM »
Aren't there any UK banks that offer tracking your electronic expenses and budgeting in their internet bank? In Norway several banks do this and have a function called "my economy" or something similar. My bank automatically shows my what I spend in several categories with the card of that bank. Sometimes I need to help with a part of them. I can also import transactions from other cards. And the bank also offers a budget function that suggests a budget based on last year's expenses.


  • Bristles
  • ***
  • Posts: 274
  • Age: 33
    • Bulls, Bears and Beers
Re: How do you make a budget?
« Reply #12 on: March 08, 2018, 08:43:24 AM »
I have always done all of my own budgeting in Excel, and was in a very similar situation to you until last year. Take-home pay goes in at the top, all bills needing to be paid out of that paycheck were accounted for (and paid up front on pay day), and then I was left with a bunch of money after that for things like groceries, gas, and "miscellaneous spending." This strategy worked to make sure I never missed paying a bill, but it did NOT work for things like paying off my credit cards and responsible saving, because that leftover cash after my bills were paid was basically all up for grabs in my mind. Nothing got tracked and as long as I didn't overdraft I saw that as a victory. I was budgeting!!!

I still do it all myself, but I have a very strict set of categories these days for the paycheck delta after my bills are paid. After all bills, I then give myself $75 per week for groceries (I am single so this is enough for me), $40 for gas (to last two weeks), and $50 for miscellaneous. This miscellaneous category is what I use to purchase ANYTHING outside of groceries or gas. That means if I want to go out to eat, I have to use that $50. If I want to buy a new shirt, I have to use that $50. If I need to buy shampoo or want to get my nails done.... that comes from my $50. Giving myself so little "spend" money has shown me just how much I actually don't need.

EVERYTHING ELSE goes toward savings. For me, savings has meant debt paydown (and will continue to mean debt paydown--credit cards and car) until next January. After that, this money will go toward "true" savings (upping 401k & HSA, emergency fund, other investments.)

You don't *need* a budgeting app or anything... it's possible to do it yourself with a little discipline. Some people here suggest tracking your miscellaneous spending for a few months to see how much you spend in each category, but with how my brain works (and this is totally a personal thing), seeing how much I was spending just gave me reason to think "I need $100 a month on clothes/personal care, because that's what I'm currently spending." The better way for me was "you get $50, so you better only buy what you actually need." I would suggest giving yourself a bit more than you think you'll need to begin with, and then challenge yourself to see how far under your budgeted amounts you can stay. For instance, I used to give myself $100 per week for groceries, but realized I didn't actually NEED the full $100 to buy food for myself for a week, so I cut it back to $75. Just because I had always spent at least $100 didn't mean I had to continue spending that much. It's all a mental game I play with myself.

Of course, if you have truly absolutely NO clue going in what you spend on necessary things like food, etc. you'll need to do some tracking to know how much to allow yourself in the beginning. It's much easier to give yourself a very small amount of "fun" money, since none of that is actually necessary to begin with. Gotta eat, though. :)


  • Senior Mustachian
  • ********
  • Posts: 20856
  • Age: 41
  • Location: Toronto, Ontario, Canada
Re: How do you make a budget?
« Reply #13 on: March 08, 2018, 09:09:57 AM »
I use credit cards for 99% of my spending, making it easy to see what I spent where.

Yep, this is how we track our spending.

Honestly I don't and never have 'set a budget'. Instead we work hard to optimize spending habits. It then literally becomes a habit.

Yep, this is how we budget.


  • Walrus Stache
  • *******
  • Posts: 6807
  • Location: London, UK
Re: How do you make a budget?
« Reply #14 on: March 09, 2018, 02:47:58 AM »
+1 that there's a difference between a budget (planning in advance the amount you're going to spend on everything) and tracking expenses (knowing how much you actually spent on everything in the past month/year). And +1 that the former is not very important to me but the latter is crucial.

You may find a budget helpful in the beginner stage, when you are readjusting your spending expectations, but it's the expenses tracking which is the important long-term thing.

I put all our expenses into an excel spreadsheet once a month. You can make up whatever categories are helpful to you. I currently have one for cheese because a new cheese shop opened up and I want to be able to show my husband how much we spend there if it becomes problematic. Each month gets its own tab and then I import the totals for each category into a summary sheet which calculates a rolling monthly average for that year and compares it to last year's average. If it's more, it turns red.

That's enough for me because I have re-philosophised my spending and just need little reminders if it's getting out of hand. If I overspend one month, I can see it and compensate the next month. Our spending can be bumpy (did a big speciality food order last month which should last six months, so February's food spending looks insane but the average will be fine) so I want to keep focused on the bigger picture. If you are the kind of person who spends money because it's there, then the answer is that your budget is what you spent last month in every category minus 5. Rinse and repeat.

I know this isn't exactly asking your question, but predicting your spending is a fool's errand. Tracking and then adjusting is much better.


  • Pencil Stache
  • ****
  • Posts: 983
Re: How do you make a budget?
« Reply #15 on: March 09, 2018, 03:53:49 AM »
See, I don't see predicting your spending as a fool's errand at all, not if you have tracked your past spending to see what you've actually spent in the past.  I see it as a self-imposed limit on some purchases.  Like a lot of things, it's all about choices and priorities.  I use YNAB, and do some of both.

How I budget varies greatly on what my goals are at a given time.  Before, when my goal was just "save what I can", I didn't make a budget.  I just checked my accounts at the end of each month and made sure they had grown by a target amount (let's say $1k for checking/savings).  I'd come to that target amount by taking my income and subtracting all bills and "reasonable" spending.  If I didn't see my bank account go up by $1k, then that meant I overspent that month, and would check my spending a little more the next month.  Once a year a large bill would have to be paid, so I knew that that month I would not see that $1k target.  If I was saving for a big vacation, I'd decide how much I needed to add to the target, so might make it $1.2k/month.  I'm single, it worked great, for my goals at the time.

Now, I have a few large, and separate, savings goals.  I want to build a house on my property, help my son with college, and pay for a newer car.  During this time, I still want to fund some vacations, my quilting habit, and make sure I'm saving for all the "unpredictable" things like home maintenance, car repair/maint/tires, etc.  So, until those large three goals are achieved, I need to have a better handle on where everything I spend is going, and make sure I'm happy with my saving rates on all my goals.

Anything that has an annual fee has a category (Costco, PO box, photography club, etc).  I know what the annual fee is (or should be), so I put some money in each category every month.

I know I will save a minimum of $x amount each month for my son's college, the house, and the car, so those each have a line.

Every bill gets a line.

Every non-monthly but "known" expense gets a line (property taxes and similar).

My hobbies get a line so that I can add a little money toward them when I work some OT, but I keep spending on those in check otherwise.

Groceries, fuel, eating out, etc get a line.  I can "predict" what I spend each month here, but it's mostly there to keep that spending under control.  Some months we don't go out to eat at all, so that just builds up and maybe we'll go for a nicer meal once instead of blowing it all on fast food.  Groceries could get ridiculous if I didn't set a "predicted" amount each month to aim to stay under.  I let the fuel line build up some funds, knowing I don't spend it all every month, but a road trip, or more trips to the property, will cost more than a regular month.  The leftovers just build up a "slush fund".

My car repair line gets larger as a car gets older or I know I'm going to be due for tires soon.  I save some every month to build the "slush fund" so that regular maintenance is covered, but also a little toward tires, etc, for future expenses.

"Fun Money" gets a line so that I can purchase whatever without guilt that it's cutting into my savings.  Some months I use it all, some months I just let it build.  Makes dropping a few hundred on show tickets easier, because I know I've already set that money aside just for the fun, frivolous stuff.

Each savings goal gets a line.  I really like to see these categories grow.  When I work OT, I drop a little extra into several categories (fun, car or home maintenance, groceries, etc) so that I feel like I get a little instant gratification from the extra income, but then I dump the rest into these categories and it feels really good.

Once my son is out of college, my new house is built, and the car is covered, I'll probably go back to my old ways of just making a target each month.  Tracking the spending and creating specific goals has made me very aware of my spending, and cut out a lot of "bad habits".  I'm naturally frugal, so my spending was never really out of hand, but it wasn't helpful toward what I really wanted.

TL;DR, budget should be based on your goals and priorities, saving for those "emergencies" so they don't catch you off guard, and allowing you to save money where you don't care so much, so you can put more money where you do care. 


  • Magnum Stache
  • ******
  • Posts: 4008
  • Age: -162
  • Location: Always Winter
Re: How do you make a budget?
« Reply #16 on: March 11, 2018, 06:17:37 AM »
I make a list of all the stuff I need to buy, and how often
Rent and utilities monthly
Clothes four times a year
Vacations planned for the year
Groceries bare minimum needed a month
Annual and monthly insurance
Bus passes
Monthly, over the counter and emergency medications takes time to estimate
Christmas gifts
Other gifts
Coffee and takeout for me
Entertainment expenses (dinner once or twice a month, a few extra teas, 2-2 movies and 2 or two fancy things a year) - takes time to figure out, looking at Google photos helps me figure it out
Household stuff
Shoes 3-4 times a year $$$$$
Now there's a cat and toys and food and litter and I didn't account for a sitter in my travel line

This takes 2-3 cups of tea to do, but is kinda fun. My list above is only half complete.

Then I add it all up for a year. This is my bare bones budget. by 12 it is my monthly bare bones - except I will often take travel and a few annual bills out and make a monthly bare bones without travel and shit budget. Then I compare this to my income and check if I'm fucked. $1650

Then I find a percentage that I want to pay into long term savings, and a $ amount I want in short-term medium term savings. If I'm still not crying, this will be okay. $320

Now I like to see if there is leftover money that I can add back to my monthly, usually about $200/month, so that I can do a few non-barebones things. $1850

So I need $2170 a month. Okay cool. Most months I make that. On months I make more, I put extra into savings and make it invisible. On months I make less, I don't top up, and pay myself 2000/month (320 for savings).

After rent and bills, I rarely track within the month. Sometimes I need to tighten up one area because I'm spending more somewhere else. This usually works out - late fall I go Christmas shopping, but there is free food everywhere.


  • Pencil Stache
  • ****
  • Posts: 824
  • Location: Texas
    • Needs More Glitter
Re: How do you make a budget?
« Reply #17 on: March 11, 2018, 04:07:24 PM »
I use YNAB4 for my daily budgeting and tracking. But I also do a broader 'spending plan' that looks something like this:

Gross Annual Income$XX,XXX
Pre-tax 401k/retirement contributions$XX,XXX
IRA/retirement contributions$X,XXX
Taxes (estimated)$XX,XXX
annualized car insurance$XXX
Net Annual Income$XX,XXX
Net Monthly Income$X,XXX
cell phone$XX
toothpaste etc$xx
idk whatever you spend money on$xx
Monthly surplus$xxx

This makes sure that I'm meeting my retirement/savings goals and pulls that stuff off the top, and then my plan is based on that net monthly number AFTER I've done all the saving I want to do, and accounted for infrequent but large(ish) bills.


  • Handlebar Stache
  • *****
  • Posts: 1667
  • Age: 39
    • Life is Good - Aceyou's Journal
Re: How do you make a budget?
« Reply #18 on: March 11, 2018, 06:13:20 PM »
Question 1: Ask whether you are spending less or more than you are earning? 

     If more, then you have a huge problem suspend all non necessary spending immediately.
     If less, than go to question 2. 

Question 2: How much do I spend on housing, transport, and food?

    From there pick one at a time and start optimizing it.  So, maybe say to day I get off work I'm going to call 10 insurance companies and shop for better rates on homeowners and car insurance.  Personally, I think it's good to start with ways to save money that don't effect your happiness one bit.  You are just as happy driving a car with insurance company A as you are with company B.  Once you've done all the things that don't change your life at all, go on to things that do.  So, maybe attack your eating out budget.  Stuff like that. 

It took me 18 months after I found MMM to go item by item and optimize my spending.  Now it's all on autopilot and I dont have to think about it. 

Good luck!