Effortless 6 Step Budgeting For All Levels Of Income

You need a budget. And hopefully, after reading this article, you’ll want to make a budget since it’s useful and super easy!

A lot of people don’t do budgets because they think it’s complicated and takes too much time. There are those who believe that making a budget means not spending money on maintaining their lifestyle. Some also think budgeting will make them miserable because they are restricting themselves on spending.

We want you to know that absolutely none of those are true! Budgeting is effortless, only takes about 15 minutes or less to start, and even with a budget, you can still buy the things that you want to.

Since I started budgeting, I’ve been able to save and invest more of the money I earn. Not only that, but I’m still able to buy the things I want and I don’t feel guilty about it since it’s in my budget!

Budgeting is also necessary in the 7 Easy Steps For Financial Freedom And Wealth.

What is a budget?

A budget allows you take charge over what you should spend your money on. It is a plan that you typically follow to make sure you have enough money for your needs, your wants, and your savings and investments.

Without a budget, you’ll have a feeling of losing control over your finances.

Fail to plan

A budget is so important that every financial expert, planner or coach that is worth their salt will definitely convince you to have one. Some of them might tell you that they don’t budget… but technically they still do.

The Barefoot Investor (Scott Pape) will tell you he doesn’t budget. Instead he has a system he calls the “Buckets”. Technically though, it’s still budgeting, with a different re-branding!

There is also a video by Graham Stephan where he reacts to another video by CNBC. The video Graham reacted to argues that budgets are a waste of time… but at the end of the video, the CNBC host clearly gives a tip that technically is STILL just budgeting! And I just love Graham’s reaction to it!

Hopefully, after reading all those you’re now convinced that you should make a budget in order for you to be better with your finances. So now you should grab a piece of paper or just use a note app on your phone, and proceed to our super easy 6 step budgeting below.

The 6 step budget

Step 1: Figure Out Your Net Monthly Salary

Let’s start off with probably the easiest part. Just write down how much cash you make per month.

This will include your net monthly pay as an employee and the monthly cash your businesses produces, if you have one. If you’re salary/business income varies every month, you can use the average net amounts you receive.

Step 2: List Your Monthly Expenses

This is the part that you’re going to spend some more time on.

You don’t have to be super accurate to the last cent here, but do give a bit of effort on being as close to actual spending per month.

Begin by looking for your monthly bills and determine how much you usually pay for electricity, water, rent, insurance, monthly subscriptions, and the like. Or maybe you can even just try to determine this from memory as these amounts are usually almost the same every month and is easy to remember.

Next, you can estimate how much you spend per month on expenses that are not billed monthly, like your groceries, clothing, eating out, hobbies, gym memberships, pet needs and etc.

Just ask yourself, what are the things that you usually spend on as you go about your weekdays and weekends, and how much do you usually spend on them?

Step 3: Categorize The Expenses

In this step, you’re going to have to go over all the expenses you’ve listed and put them into one of three categories. Note that since these are your expenses, you get to determine which category they go. The examples are merely suggestions.

First are the “Essentials”. This category is for the expenses you can’t live without or expenses that are essential to do your work. This usually includes rent, electricity, water, gas, commute and groceries.

Next, we have “Security”. Here is where you put the cash outflows that make sure your financial health is stable. Insurance payments, debt payments and emergency savings can go here.

Then we have “Lifestyle”. The expenses in this category are the expenses you can do without. These are usually things that are fun, but not necessarily needed. When you’re having a hard time financially, consider reducing or cutting out the expenses in this category first.

Examples of expenses you can put on Lifestyle are what you spend on gym memberships, restaurant meals, pet needs, new clothes, video games and movies. Savings for a future travel plan, future concerts and just general future vacation savings may also go here.

Include enjoyable epenses

Step 4: Evaluate Your Current Situation

This step is fairly simple but you have to be honest with yourself.

All you have to do here is compute your net extra cash by taking your total net monthly income and deduct your total monthly expenses.

If it’s a negative, then you’re going to have to cut expenses until it is no longer negative. Start by looking at your Lifestyle expenses and determine which ones you can reduce or totally get rid of.

If you have eliminated all your expenses except the essentials but it’s still a negative net cash at the end of the month, then you should consider taking on some form of part-time job to increase the cash you receive per month.

If you do have extra cash, then great!

You can use this cash to pay debts early, increase your emergency fund or add to your investments (which we talk about in the next step).

Even if you do have extra cash, you might still want to check if there are expenses you want to reduce or eliminate.

Step 5: Determine What Needs To Be Done With Your Extra Cash

If there is extra cash after considering all your expenses, you have to decide what you want to do with it.

You have several choices such as putting it towards your emergency fund if you need to get it to a certain amount.

If your emergency funds are already at the sufficient amount that you’ve decided on, then you can start using your extra cash to pay off debt early.

If you’re fortunate enough to have zero debts, then you can start using the extra cash for investments.

You can read about Why You Should Start Investing Right Now.

Also, if you have a lot of extra cash, you can even start saving a portion of it for future trips, concerts or some expensive hobby you want to start in the future.

Like I said, budgeting doesn’t mean restricting yourself from doing fun things with your money! It simply means being responsible in spending your hard-earned cash.

Why not have part of your extra cash for investments, and the other part for your travel plans? It’s all up to you!

Step 6: Track Spending And Refine Your Budget

Remember that the first time you make your budget, it won’t be at its best. Even though we can definitely still use estimates, it would be best to be as accurate as possible.

You can start logging your expenses so that you can review them at the end of the month. You would probably only need to do this for one or two months to determine how much you actually spend on things, if you don’t want to do it for the entire year.

When I did my budget, I tracked 2 months of spending and I determined it was pretty accurate with just that data.

You can easily record your expenses with today’s technology. Simply search the app store for “spending recorder” or “budgeting apps”, and try out different ones until you get one that you’re comfortable with.

Once you have your one or two months of actual spending records, then you can start refining the expense part of your budget.

You can determine if perhaps you’re spending too much in one area or you’re going overbudget for some expenses. So you may want to reduce those.

When I did my budget, I clearly saw that my electricity expenses and grocery expenses were too much, especially compared to how much I earn a month, so I did my best to reduce those!

I Have A Refined Budget, Now What?


Well, now you just have to do your best to follow it.

Personally, I do my best to follow my budget but I don’t really make a big fuss being extremely accurate and strict about it. If I do spend in excess of my budget, I’ll be fine as long as it’s not that much.

I just make sure to always have enough money that I add to my investments as my savings every month that is close to what I budgeted for, and I hope you do the same as well!

And That’s All You Have To Do To Start A Simple Budget!

I’ll end this post with one tip: Start your budget right now, and don’t make any excuses. If you’re reading this, that probably means you have the 15 minutes needed to begin budgeting.

It doesn’t have to be accurate. It doesn’t have to be pretty. What’s important is that you start immediately so you have something you can refine later.

So just grab a piece of paper, or just type it on a spreadsheet on your laptop or cellphone and start listing your monthly income and expenses.

And do your best to follow your budget!

So, tell us with a comment below if you do personal budgets. Also, are you able to follow your budgets well?

Good luck and I hope you learned something!

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4 thoughts on “Effortless 6 Step Budgeting For All Levels Of Income”

  1. Jalan Cunningham

    These were very helpful tips since I’m currently trying to budget and save better

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