If you want to get a hold of your finances, you need to control your spending—and that starts with establishing a budget. Learn how to create a budget, best practices for sticking to it, the latest budgeting software available to you, and more.

    Frequently Asked Questions

    • How should a beginner budget?

      An individual’s budget will vary depending on their lifestyle, spending habits, and net income. To start a budget, you need to take a deep dive into how you spend your money, which includes gathering all of your bills and pay stubs. When you have all of your bills and pay stubs, write down all monthly expenses. Then, write down your monthly income. Subtract the expenses from how much money you make. If the number is less than zero, you are spending more money than you make, and it is time to reevaluate your spending and saving habits. A beginner can use a budgeting spreadsheet, calculator, or various applications to assist in the process.

    • What are personal budgets?

      A personal or household budget is a financial summary that compares and tracks your income and expenses for a defined period, typically one month at a time. Essentially, it is a written plan for how you will spend your money. It allows you to make financial decisions ahead of time, making it easier to cover all your expenses. It also helps you to pay off debt, save for the future, and be able to afford fun expenses. Budgeting consistently can help you turn your finances around and start the process of building wealth.

    • How much spending money should you have a month?

      How much spending money you should have each month depends on the individual. However, to determine this amount, you need to get a sense of how much you are spending per month compared to what you earn. This way, you can set spending limits. The first step is to take a look at mandatory expenses, then add them all up and subtract the total from your income. The amount you have left is what you can budget for discretionary expenses and savings goals. There are many different budgeting strategies you can follow to determine how much you spend each month. Generally, what you budget for expenses should not be more than your income; otherwise, you will end up in debt.

    • What are the three types of expenses?

      Each month, you’ll likely spend in three categories of expenses: fixed, variable, and discretionary. Fixed expenses are necessary ongoing costs that don't change in amount or frequency. Some examples include rent, health insurance, or a phone plan. Variable expenses are still considered necessary costs, but the amount you spend changes every month. The amount you spend on groceries or clothing each month can be considered variable expenses. Lastly, discretionary expenses are those expenses that you desire and would like to have but do not necessarily need, such as a dinner out at a restaurant or concert tickets.

    • What's the 50/30/20 budget rule?

      The 50/30/20 rule of thumb is a way to allocate your budget according to three categories: needs, wants, and financial goals. Through this strategy, 50% of your budget will go toward needs, 30% will go toward wants, and 20% will be put away for financial goals. All of the categories use your after-tax income.

    • How do I make a budget spreadsheet?

      While you can make a budget by hand or by using one of the many applications or software available, a spreadsheet is one of the most effective ways to create a budget. To make a spreadsheet, you must first download a software program, such as Microsoft Excel. Then you’ll need a list of fixed monthly expenses, variable monthly expenses, and income records for everything you earn. Next, decide how you wish to organize your spreadsheet, whether that be by including all information in one sheet or creating several tabs within the sheet. Then, track your income sources, as well as your expenses. Compare the two, and continue to track your spending and saving habits within the sheet. There are also several pre-made sheets available online if you do not wish to start from scratch.

    Key Terms

    A consumer looks at her bank account.
    Financial Institution
    A young woman enjoys coffee with a friend.
    Financial Assistance Options for Those Living With Disabilities
    A man checks his utility bill.
    Where To Get Help Paying Your Utility Bills
    A man considers selling his phone.
    Phone Trade-In vs. Selling: Which One Pays Off?
    A consumer uses the BBB website to gauge a company's trustworthiness.
    What To Know About the Better Business Bureau and Financial Products
    A recently laid-off IT employee contemplates what to do with his unemployment benefits.
    The Smartest Way to Use Unemployment Benefits
    A consumer takes notes about J.D. Power insurance rankings.
    What Is J.D. Power?
    Couple just married
    Who Needs a Prenup?
    Hand holding credit card and wallet by laptop
    Want To Save More? Stop Shopping in Stores.
    volunteer bringing deliveries
    Why You Should Make Year-End Donations
    An illustration shows the four section 8 qualifying factors: family status; income; citizenship; eviction history.
    How To Qualify for a Section 8 Voucher
    Preteen boy takes selfie with older man on park bench.
    Can You Give Directly to an Unrelated Child's 529 Plan?
    How to Master Ibotta and Earn Cash While You Grocery Shop
    Couple talking in kitchen
    Net Worth
    graphic showing two people on top of stack of books with a ruler and pencil.
    What Is the Rule of 72?
    Illustration of woman shopping and opening a box
    The Pros and Cons of Online Shopping
    Man and woman holding hands and looking concerned in an office
    What Is a Bankruptcy Certificate?
    Cheap and fun alternatives to watching TV
    13 Cheap and Fun Hobbies To Pick Up
    A person looks at their phone.
    Budget App
    A worried man holds his head in his hand while staring at a laptop and a pile of bills, deciding whether to file a CFPB complaint
    How To File a Complaint With the Consumer Financial Protection Bureau
    A woman buttons the shirt of a young child
    Reduce Your Tax Obligations With a Dependent Care FSA
    A couple holding shopping bags walks along the sidewalk looking in windows at holiday items.
    Tips for Getting the Most Out of Black Friday
    person in apron at coffee shop taking a gift card from a customer
    The Best Way To Give (and Get) Gift Cards
     Doctor consoling mature woman sitting with son in hospital waiting room
    Living Will
    Person making a budget
    Basic Budgeting Tips Everyone Should Know
    A man sits on his bed as he writes something.
    Woman working on personal budget at a laptop.
    Net Income
    A couple reviews their credit card debt as they embark on a debt reduction plan.
    The Balance Money Kit: Eliminating Credit Card Debt
    Image shows a man sitting at a desk drinking a cup of coffee with a stack of books next to him. The books are called "personal finances and you", "manager your money", and "how to win the personal finance game"
    The 10 Best Personal Finance Books of 2022
    Image shows a table explaining the difference between disposable income and discretionary income. Text reads: "Disposable income vs. discretionary income. Disposable Income: disposable income = money left over from salary after all taxes paid; one of five determinants of demand; dictates consumer spending. Discretionary income: what's leftover after paying necessities out of your disposable income, like rent, mortgage payments, healthcare, and transporation; can be spent on non-essentials, such as dining out, investing, and travel; essentially, considered your 'fun money'"
    Disposable Income
    Illustration shows a calendar depicting all twelve months in 2019, 2020, and 2021.
    Months When You'll Receive 5 Paychecks From 2022-2029
    A delivery man hands a box of merchandise to a woman at her front door
    All About Car Alignments. Signs you need an alignment are you have issues steering your car, you notice an unusual amount of road noise, and you see uneven wear on your tires. Key details to know include before getting an alignment, ensure your mechanic is ASE certified and certified repair shops recommend you get an alignment every 6,000 miles (or every other oil change)
    How Much Is That Car Alignment Going to Cost You?
    Young woman looks through her mail at a mailbox
    Choose the Debt Payoff Strategy That’s Right for You
    What Is an Immediate Family? Immediate family is not defined under law and its composition varies for different legal or financial purposes. Immediate family may apply to civil partnerships, cousins, grandparents, great-grandparents, aunts, uncles, and even further. You must look at how it’s defined in a particular situation. Common situations where you may encounter an immediate family requirement include bereavement, immigration, FMLA leave, and stock market transactions.
    Immediate Family
    A couple looking happy after winning a lottery
    What Are Your Odds for Winning the Lottery?
    Parents doing home finances and talking to teenager
    How To Create Your Financial Plan
    A man shakes hands with someone.
    man in collared shirt sitting in all white room, working on computer
    Evaluate Retirement Accounts To Make Sure You’re on Track
    A woman looks over paperwork.
    Understanding the Difference Between Fixed and Variable Expenses
    person in gold t-shirt looking at paperwork in a glass office
    How To Set Savings and Financial Goals
    Young woman saving money in a jar
    A Complete Beginner's Guide to Saving Money
    A group of people gather at their communal living area's dining table to share a meal
    How Much Does It Cost to Live in an Intentional Community?
    Man listening to a podcast
    Best Finance Podcasts of 2022
    A family enjoys a barbecue in their yard.
    Middle Class
    Woman picking up rental car
    How Much Is a Rental Car Going to Cost You?
    List of expenses with calculator
    6-Step Guide to Creating a Monthly Household Budget
    graphic showing two people on top of stack of books with a ruler and pencil.
    How Big Should Your Emergency Fund Be?
    Image shows a circular graph broken down by budgeting percentages. Text reads: "Basic budget percentages: Transportation: 10-15%; savings: 10-15%; food: 10-15%; insurance: 10-20%; housing: 25-35%; clothing: 5%; personal: 5-10%; entertainment: 5-10%; utilities: 5-10%; transportation: 10-15%"
    The Simple Way To Calculate Budget Percentages for Your Money Goals
    Woman in blazer and glasses filling out paperwork on clipboard in office
    How Much Does a Legal Name Change Cost?
    Two people on a boat sailing
    Understand Wealth, and Become Financially Independent.
    A person with Down syndrome serving a scone to a woman in a cafe where he works
    ABLE Account
    Person putting a letter in a mailbox
    How Old Do You Have To Be To Join AARP?
    Woman lying on couch holds credit card and tablet
    Cutting Expenses and Closing Accounts for a Simple Budget
    man in apron sitting at counter filing paperwork
    How To File for Unemployment if You Work Part Time
    A baby smiles while holding the hands of an adult for support
    What Are the Average Costs of Raising a Baby?
    Woman at a gas station refueling her car.
    The Best Apps To Save Money on Gas
     Volunteers hand boxes down a line toward a van
    A sinking fund allows for the planning of spending over a period.
    What is a Sinking Fund and Should You Have One?
    Midsection Of Person Analyzing Chart With Calculator And Laptop On Office Desk
    The 9 Best Accounting Books of 2022

    Page Sources

    1. Consumer.gov. "Making a Budget."

    2. Consumerfinance.gov. "My Spending Rule To Live By," Pages 1-2.

    3. Cornell Law School Legal Information Institute. "Lien."

    4. The Federal Reserve. "Federal Reserve Bulletin, Changes In U.s. Family Finances From 2016 To 2019: Evidence From The Survey Of Consumer Finances."