How to Balance a Budget

Photo Courtesy: Jose Luis Pelaez Inc/Getty Images

If you’re tired of wondering where your money keeps running off to every month, it may be time to delve into the wonderful world of budgeting. While it can be anxiety-inducing to think about your finances, planning ahead can help you anticipate what your bank account will look like and keep you from being surprised by expenses. 

Never attempted to balance a budget before? Well, it may sound like daunting task, but you can rest assured. Here, we’ll walk you through everything you need to know when it comes to maintaining a personal budget. 

Where Do I Even Begin?

First of all, congratulations on making it this far. The idea of learning to balance a budget is one that many people entertain but consistently avoid. While organizing a budget is pretty far down on most people’s list of activities, doing so can be the key to affording — and experiencing — more in the long run. 

 Photo Courtesy: seksan Mongkhonkhamsao/Getty Images

In essence, balancing your budget allows you to to make sure you aren’t spending more than you’re making in a given month. It’s less a matter of complex accounting and more a matter of simply paying attention to your money and where you’re spending it. When you first begin, you’ll want to focus on two main categories:

  • How much money you make each month
  • How much money you spend and on what

Zeroing In on Income

Figuring out how much money you make each month will be an easier task for some people than others. If you’re on a set salary or get paid roughly the same amount each week or month, that makes things a bit easier. So, if that’s your financial situation, write your monthly income down and move on down to the expenses section.

 Photo Courtesy: MoMo Productions/Getty Images

On the other hand, if you do freelance or hourly work and get paid a different amount each week or month, things can be a bit trickier. There are a few ways to go about tackling such an issue, depending upon your situation. To start, calculate your income for the last six months or so by using one of the following methods:  

  • Use the lowest month’s income to calculate your budget. That way, if you make more in the future, you’ll have extra money to save or invest. If not, your budget will be prepared to work with that number.
  • If you have money in savings, you can format your budget each month to work with the amount you got paid the previous month. This way you’ll have a set amount of money each month to disperse in the coming months.
  • Calculate your monthly average and work backward. This method assumes that you always have work available. It more or less involves setting up your budget first so that you’ll know how much money you need to make each month. Once you arrive at your goal income, divide it by the number of workdays in the coming month and make sure you make at least that much money each day you work.

Expenses: Find Out Where Your Money Goes

Forget the fancy finance terms. At the end of the day, budgeting boils down to knowing where your money needs to go and making sure it gets there — without needless impulse purchases or unnecessary spending. At this point, you’re going to want to make a list of all your expenses. Start by writing this list down or typing it directly into a spreadsheet.

 Photo Courtesy: Emma Innocenti/Getty Images

This is where you’ll want to do some detective work. Make sure you include all of your fixed expenses, including but not limited to:

  • Rent/mortgage 
  • Car payments
  • Phone bill
  • Utility bill
  • Insurance
  • Internet bill
  • Cable bill

Next, list out your variable expenses such as:

  • Groceries
  • Clothing
  • Entertainment
  • Eating out
  • Gas
  • Medical bills
  • Savings/investing

If you have set medical bills or spend a certain amount on groceries each month, these could be considered fixed expenses. At this point, what category an expense falls into doesn’t matter too much at this point. Just make sure you list everything

Finding the Balance

Once you’ve got all your categories listed on a spreadsheet, it’s time to disperse the money in your income category into all of your expenses categories. Generally, it’s easiest to start with things like rent (or mortgage) payments and other fixed expenses first, namely because they don’t change much (or at all) on a monthly basis. 

When you finish up the fixed expenses, move on to allocating money toward those that fluctuate a bit more. At this point, you’ll want to really consider your money goals. For example, would you rather save more — or spend a bit extra on entertainment or clothing? 

 Photo Courtesy: JGI/Jamie Grill/Getty Images

As your remaining balance to work with begins to dwindle, make adjustments accordingly so that each spending category gets a fair share of your income. And be sure to keep things realistic. For example, allocating no funds at all to your entertainment category is pretty much just setting yourself up for failure in the long run.

Also, don’t be surprised if you need to tweak your numbers from month to month. In reality, it’s very simple to balance a budget. The hard part is actually sticking to it and only spending as much money as you planned to spend in each category. Don’t be too hard on yourself; finding the right balance takes time. 

Fun Budgeting Apps and Resources

If you want to make your own budget, then head over to Microsoft Excel, which is now available to use online for free, or Google Sheets. In both, you’ll find a variety of budgeting templates to choose from — or you can simply make your own. 


For folks who’re looking for something more in-the-palm-of-their-hand, there are also numerous apps out there that can help lighten the budgeting burden. Some of the best include:

  • Mint: One of the most popular free budgeting apps, Mint can sync with your bank accounts and help you keep track of where your money is going. It also lets you set up bill payment reminders, track your investments and spending, and access your credit score.

 Photo Courtesy: Eva-Katalin/Getty Images
  • You Need a Budget (YNAB): While YNAB does require a subscription after the 34-day free trial, users swear by it. It offers a proactive budgeting approach that allows you to assign a job to every dollar you earn. If you stick with YNAB, you’ll end up saving way more money than you pay for its subscription fee.
  • PocketGuard: PocketGuard is another great free option. When you sync it with your bank accounts, it will automatically categorize your expenses and keep track of upcoming bills. Or you can manually create your own categories and limits if you’re feeling adventurous.