If you have tried to budget before and given up, you are not alone. Most budgets fail because they are too strict or too complicated. This guide shows you how to make a budget in five simple steps, so it fits your real life and actually sticks.
Learning how to make a budget is less about math and more about habits. The steps below take about an hour the first time, then about 15 minutes a week to keep up.
Step 1: Know your take home pay
Start with the money that actually lands in your bank account each month after taxes and deductions. If your income changes, use your lowest normal month.
Step 2: List your fixed bills
Write down rent or mortgage, utilities, insurance, phone, minimum debt payments and childcare. These are the costs that stay about the same every month.
Step 3: Estimate your changing costs
Groceries, gas, household items and fun money change month to month. Look at your last two or three bank statements to see what you really spend. Groceries are often the biggest changing cost, so our guide to setting a grocery budget for a family of 4 is a good place to start.
Step 4: Pick a budget method
The 50/30/20 budget
Split your take home pay into 50 percent for needs, 30 percent for wants and 20 percent for savings and extra debt payments. It is a simple starting point if you want to make a budget without tracking every dollar.
| Monthly take home pay: $4,000 | Percent | Amount |
|---|---|---|
| Needs: housing, bills, groceries | 50% | $2,000 |
| Wants: eating out, fun, shopping | 30% | $1,200 |
| Savings and extra debt payments | 20% | $800 |
The zero based budget
Give every dollar a job until income minus spending equals zero. It takes a little more time, but it shows exactly where your money goes, which makes it one of the best ways to make a budget when money is tight.
Whichever method you choose, the key to how to make a budget work is giving it at least two full months before you judge it.
Step 5: Track and adjust
- Check your spending once a week, not just at the end of the month.
- Expect the first month to be messy. Adjust the numbers, not your goal.
- Add sinking funds for yearly costs like holidays and car insurance.
- Leave a small amount of fun money so the budget does not feel like a punishment.
The fastest way to free up money in a new budget is usually food. Planning dinners with our $50 weekly meal plan can lower your grocery spending right away.
Free tools to help you make a budget
The FDIC's free Money Smart program has lessons on budgeting and saving, and MyMoney.gov collects simple federal money guides in one place.
Why it is hard to make a budget stick
Most people who try to make a budget quit within a month. Usually the plan was too tight, there was no room for fun, or one surprise bill threw everything off. The fix is to make a budget that expects real life: round your estimates up, keep a small buffer and plan for yearly costs.
How to make a budget as a family
- Sit down together once a month for 20 minutes to plan the next month.
- Agree on a small amount of personal spending money for each adult.
- Let kids see part of the plan, like the grocery budget, so they understand the choices.
- Plan meals for the week, since food is where family spending adds up fastest.
Common budgeting mistakes
- Forgetting irregular costs like car registration and birthdays.
- Budgeting from your gross pay instead of your take home pay.
- Not tracking small purchases, which can add up to hundreds a month.
- Giving up after one bad month instead of adjusting the numbers.
Once you know how to make a budget that fits your life, saving gets easier. Try the 52 week money challenge or a short no spend challenge to build momentum.
Frequently asked questions about how to make a budget
What is the easiest way to make a budget?
Start with the 50/30/20 rule. Split your take home pay into needs, wants and savings, then adjust.
How do I make a budget with irregular income?
Budget from your lowest normal month and put extra income toward savings or debt when it comes in.
How often should I check my budget?
Once a week is ideal. A quick check keeps small problems from growing.
What should I cut first?
Look at food first. Takeout and unplanned grocery trips are often the easiest savings.
