Creating and sticking to a budget: Gathering your information

by Melody on January 23, 2012

I shared our family’s journey to becoming debt free a few days ago as an official kick-off to this budgeting series.  Now I’d like to rewind and start with the basics of getting started.

There are two solid truths I have learned about budgeting:

  1. It’s hard.
  2. Your 1st (and probably your 10th) budget won’t work.

1. If you been living without a budget and are now starting to live within one, you will have a very steep learning curve.  Telling yourself (or your spouse) that you can’t purchase something you would have bought in the past stings.  We have found that the overall sense of peace we get from knowing where our money is going eventually far outweighs the feeling of sacrifice.

2. If you have never written a budget and never tried to live on one, please don’t expect that your 1st budget will be the one that will last you for the rest of your life.  I have heard too many people say that they tried it once, failed miserably and gave up.  Write a budget.  Scrap it.  Write another one.  Make some changes.  Possibly scrap that one.  Write it again.  We are still rewriting our budget, based on where we are at financially or what’s going on in our life.  Give it life and let it breathe.

But how do I get started?

First off, if you are spending more than you are bringing in, something needs to give.  Sit down and write out all your expenses, starting with fixed (utilities, mortgage, car payment, daycare, interest-carrying bills).  These need to be paid first.  Follow this up with other important items on your list that you can’t live without, like groceries and gas.  The other “stuff” may have to wait for now.

Where is your money going?

If you don’t know where your money is going, track your daily expenses for a few weeks or a month.  Find out what you are spending your money on.  If you are disciplined, you could keep a money journal to track everything.  If you’re like me and forget just about everything, does a fantastic job of tracking your expenses through your debit or credit card and can give you a great summary of where your money is disappearing to every month.

Writing your budget

Figure out where you are going to keep your budget.  If you are an Excel fanatic, start there.  If you are like me and couldn’t create a formula to save your life, keep your budget in a basic Google Doc Spreadsheet.  When we first started, our budget was hand-written.  It took me about 2 years to finally give in and put it on the computer.  It did really help me in the beginning to see it all laid out in front of me, to be able to physically cross off and highlight items made me feel very in control.  Use  It is a fantastic tool to not only track your spending, but help you start and create a budget.

Once you have a good idea of what you are spending over the course of a month, you can start to write your budget.  Again, start with your fixed expenses.  What must be paid to avoid late fees (or to keep your power on) every month?  What is a necessary expense in your house?  The most important thing to remember is that your basic needs must be met first.

Stay tuned for our experience with a “Zero-Based Budget”.  I’ll share the different funds we contribute to each month and how we keep everything organized.  It’s possible there might be a giveaway of the most amazingly fabulous cash envelopes ever made.

Update: Please feel free to check out my entire 2012 Budgeting Series.

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{ 14 comments… read them below or add one }

Heather January 23, 2012 at 7:25 pm

I’ve heard several people mention and some other budgeting sites. How do you know what site to trust with your bank info?


Melody January 23, 2012 at 7:30 pm

That’s a very good question. I’ve had several trusted friends recommend, so I knew I could trust it myself. If you read through their security page, they use similar practices and encryption as banks do.

We really don’t use it much and all the things it offers can be done yourself (just with a LOT more time and work involved), so if you aren’t comfortable with it, I definitely wouldn’t recommend it. At least for your peace of mind.


Miss Jay January 23, 2012 at 7:53 pm

I confess, I’m going on budgeting year 8 and I still use paper and pencil. In fact recently (in the process of my personal decluttering project) I came across some budgets from 6 or 7 years ago. Our budget was so small, no joke – it was written on a post it note.


Ivy January 23, 2012 at 8:17 pm

I’d love to hear more about these fabulous cash envelopes. We’ve done a cash envelope system for 4 years now. LOVE it, but my envelopes are always falling apart. Thanks for sharing this info. Getting debt free and living within your means is SO worth the (perceived) sacrifice.


Melody January 23, 2012 at 8:20 pm

I agree. There are definitely times we whine and complain a little about “all the things we don’t have”, but then we remember how financially settled we are and how great of a path we are on. That feeling always overshadows the “wants” and “I need it nows”.


Trina January 23, 2012 at 8:35 pm

Thanks for sharing Melody!


Lora January 23, 2012 at 9:45 pm

Oh goodie! The zero based budget is the BEST. No stones left unturned on that one. Honestly, we never did track our spending because it was too overwhelming and we would have never done it and never gotten to our budget. We just jumped in with both feet and estimated on our first budget. We then tweaked it every month and still do. Less now than at first though. It felt like a lot of work at first, but now it’s just a quick meeting to make a few adjustments.


Mandy January 23, 2012 at 10:50 pm

Does anyone have a recommendation on percentages that should go towards areas of a budget (i.e., 30% towards housing)?


Emilie January 24, 2012 at 7:04 am

That is a really regional question Mandy. I do financial coaching and almost everybody asks that question, it is a good one! I wish there was an easy answer. I’d recommend sharing your budget with people you trust to speak in to your lives and see if there are obvious issues with your spending categories. This is what Dave Ramsey recommends but honestly, this would NEVER work in Seattle (where I live) where cost of housing is so high. If we followed his recommendation on housing, our family of five would be living in a one or two bedroom apartment. :o) I’m not sure if that helps but keep asking questions.


Emilie January 24, 2012 at 7:05 am

Oops, here is the link!

Also, so you know, I agree with all his other category percentages except housing. :o)


Emilie January 24, 2012 at 7:06 am

Oh, except debts. No debts are best debts. :o)


Mandy January 25, 2012 at 9:53 pm

Thanks! Yes, I can see how the housing percentage would be abysmal for you. It is bad enough for me and I live in Auburn/Lake Tapps! I’ll use this as a nice guideline to compare against as I pull all my expenses together.

This blog series has helped motivate me to create a budget – something I’ve been meaning to do for a while but always put off. It is refreshing to see where our money is going! And so easy to see where I can shave expenses as well.


Lora January 24, 2012 at 1:46 pm

I love Dave Ramsey’s percentages on budget items. It gave us guidelines to go by that were developed by smart people with tons of experience! Our family goes UNDER our housing percentage (it completely depends on WHERE you live, I think) and have to go WAY over with vehicle expenses (even with two paid off cars!) due to my husband’s job. So I guess you have to adjust according to your own personal situation. But it is really nice to see what successful people say is a good idea! Just don’t get to caught up on it. If you have to go over the percentage in one area, see if you can go under in another. Good luck Mandy!


Kelleigh @ Kelleigh Ratzlaff Designs January 24, 2012 at 8:47 pm

Loving this series! It always gets me fired up to see how other people are doing things! And, I totally agree about scrapping a budget and trying again. We tried budgeting several times in the first few years of our marriage, but we didn’t get good at it until the last few years! We’ve been married for 14 years! 🙂 There is HOPE for the budget weary!


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