Reader Question: How To Set Up a Budget

Reader Lori has a question about setting up a budget.


I am curious to know what system your readers use for budgeting (excel, online tool, pen/paper, etc.).  Most of us on your site are trying to save money and spend less, so I want to know how they do it?  I’ve heard things about Mint, but I don’t personally know anyone who uses it, but I know there are a variety of tools out there…I just need some guidance!

I am very interested what what you guys have to say but I would like to add my two cents to this because I believe that having a budget is one of the most important things you need to do to gain control of your finances.  Whether  you make $25,000 a year or $250,000 a year, having a budget is an absolute must.  You really need to know where ever penny is going.

Creating a yearly, detailed budget, and sticking to it, has been life changing to us.    We have taken control of our finances in a way that we never have before.  And, in the process, have been amazed at where our money had previously been spent.

You can check out my recommendations for Setting up a Budget and Sticking to It on a previous post I wrote.  And, if you are, or are going to be, a college graduate, you might want to check out the Financial Tips for College Graduates – Setting Up Budgets & More.

But, enough of my two cents, I’m sure Lori, would like to hear your two cents as well.  So, what tips do you have for Lori on setting up a budget?

If you have a questions you would like to ask the LRWC readers, you can send it to  Put, “Reader Questions” in the subject line.


The links in the post above may be affiliate links. Read the full disclosure.
  • Paula Forbes

    Good morning. My budget is done with pen and paper. What I do to keep within my grocery budget is buy a store gift card. I purchase a Publix gift card and use my coupons. I don’t spend more than the gift card value. I usually get about 70% off my grocery bill with coupons. Sometimes, as much as 90%.

    • Monica M

      thats a geat idea about the gift card to not go over…

    • Lianne

      wow yeah that is a really good idea, i might try that

      • Michele H.

        I do the same thing. I have a set amount each month and I buy 4 cards, one for each week, and use them in conjunctions with coupons, weekly sales and the help of LRWC of course.

    • tala

      can you share what you buy with that kind of savings?

  • Monica M

    I’m interseted in knowing what everyone uses also… we tried mint in the past but it didn’t really allow us to change much and we linked it to our checking account and it would set funds in the wrong areas… i wasnt a fan of it… but we really need to go on a budget to help us save and not overspend

    • Paula Nj

      Monica, try mint again, the more you use it the more it gets to know you. With your checking when you go in and adjust categories that charges or debits go into you can check a box that says always this category.

      • Jessie

        Is “safe” to use? I know that was the concern for some people.

        • Lori

          Paula, are you able to separate a transaction, for example, we use the envelope system so I take out a set amount each payday for gas, eating out, etc. so even if I withdraw say $300, can I split that into different catagories?


  • AnnMarie

    I created a very simplified budget using excel. I started with my actual paycheck. entered the info in the top of the spreadsheet – each item on a sep. line gross to net.

    I use the taxes paid in to figure out the refund i’m due come return time.

    then i use the net pay and deduct my expenses to determine what i have to “play with” each month… i use a line for each expense:
    rent / mortgage,
    gas / electric
    credit card minimum pymnts
    car payment
    and deduct the expenses from your net paycheck.
    the more detail the better to see where your money actually goes and what you need to do to save more, etc…
    you can annualize the weekly payment to get the figures for the entire year.

  • Dana C

    For groceries (which is the one place you can actually control how much you spend – rent/mortgage, utilities, car payment, etc. all have a set amount). So I use cash to buy my groceries, which includes food, paper products, toiletries and pet food. On payday I put a set amount of money in that envelope, get out my coupons and then shop. What’s left at the end of the week, I put into savings. Since I’ve been couponing, that amount I put into savings gets larger every week 🙂

  • AO

    I use the home budget app for iPhone, is another great resource, if you don’t have an iPhone ( although it has an app as well). I use the app to create a budget then I input all my bills and expenses into the approriate categories as I go. It has a notes box for each entry so I use that to record the store and the value of what I purchased so I can see all my savings!

  • Paula Nj

    I use Mint and love it they have an app for Android and iPhone which makes it easy to track where you are and what’s paid. I also use a gift card system. I have prepaid cards that I use for things like eating out as a family and one for eating out at lunch, one for entertainment. The things I trend to over spend on, when the card is empty we are done for the month. This works great for our family and my 4 yr old even says now when she asks about going out, momma do we have $ left on the card this month to easy here our there. Back to mint, very user friendly let’s you see where you are spending and how much compared to other categories tracks credit cards loans and other debts. Only thing I have found that is sooo easy to use

  • Felicia

    I tried to sit down and do a budget several times over the past year and I never stuck to it. I started Mint a few years ago just to see all my accounts in one place, then they added the budget tool! I added my car loan, credit cards, all my saving and checking accounts, and then made a budget. The first month is a little tedious, you have to review your transations and make sure they are labeled properly. For example CVS pops up as Drug Store, and I include drug store purchases in my grocery budget, so you have to change the catagory. Once it is set up it does it automatically, but it’s good to go through all the transactions weekly to make sure everything is labeled properly. When you log on it automatically updates EVERY account, and it shows you any areas for concern, it even sends email reminders when accounts are low or you exceed a budget. I love it, it is “one stop shoping” to make sure my bills are paid on time (you can add in bill due dates), and shows you excatly where every penny goes. It is also nice if you have a partner who isn’t into the budgeting, they can log on and glance at the bar graph and know the financial situation. We are a military family and Mint was awesome on deployments, it allowed for both of us to be up to date on finances so we didn’t waste the limited time on phone calls or emails having to dicuss it.
    For sticking to my grocery budget ($500 a month), I use mint as a guide, but I keep a talley of every shopping trip, what I spent, how much I saved, and any rebates I am waiting on in a spreadsheet. If I spnd less then $500 then I have mint set up to “roll” the money into the next month, so I have more money (if I spend $400 then the next month I can spend $600) to spend on my stockpile. It also helped me a ton to have extra for when family and friends visit and the grocery bill gets a bit larger.

  • Lianne

    I use pen and paper–I have a binder where I write down everything we spend, then tally it up at the end of the month. I haven’t always had a budget, I just bought whatever…until my husband was laid off in February and was out of work until May with no unemployment (he hadn’t been there long enough…and had been without work for a year before that).
    Now I have benchmarks for each category of our expenses…I’m not at the point where I have ‘envelopes’…if I go over-I go over…luckily we have a little bit of extra every month to make up for that. But I do hope to be stricter with that as time goes on and I become more comfortable with our budget.


    I use a debit card for every purchase as well as to pay my bills online. I have online banking and it has the option to download your transactions into Excel. I download it every month and then add up how much was spent in each category and decide whether I need to spend less next month and if so how I will accomplish that. Once you know how much you spend, how much you are really able to cut back then you can write up a realistic budget to stick to and find a way to track it that works for you. Good luck!!

  • Elaine

    I use Mint! I love it!! Not only does it catagorize everything you buy, it send alerts when bills are due. Also tracks your spending in a nice bar graph, so visually you can see if you are getting close to going over budget for the month. I have used it for over a year, and dont think i could live without it now. Good Luck!

  • Vercilla

    I have used in the past and returning to Larry Burkett’s Christain Budget System. Envelopes labeled with categories,groceries, lunch money, etc. On hand and you can visually see what you are doing and if the money is gone, it’s gone! I use his worksheets as well and write everything down. I am not a computer person with spreadsheets and Excel and there are not many cool applications for Blackberry. It really worked for me…..

    • Meli

      This sounds good to me! am not a comuter person either…. like to see it on paper. thanks!

    • Nance

      Vercilla, this system has worked for us for three years, isn’t it awesome?! We been involved with Dave Ramsey and his way for three years now and his budget/sytem is about the best. We stay accountable using the cash/envelope system, among other things. But the most important thing we remember is that Dave says every dollar must have a name, or you will have no month left over at the end of your money-lol! Doing this has enabled to us to save $$$$, payoff all debt in 18 monts (Including a five yr car loan paid in full within 18mo!) and we’ll have shaved off the last 6 years of our mortgage to be able to pay it off by March ’13! That is what a budget did for us-we never could have done it as fast otherwise and we’d consistently have debt until we retired. The biggest problem with many who won’t/don’t do a budget is that they are really afraid to see really just how much they are spending and on what. I was one of them. The real freedom comes from having the budget, it truly is 🙂

  • Lisa

    I as well use and it really is the best thing ever! A friend just got me hooked on it and I am upset I havent used it sooner. It takes some time to set up once you first create the account, but it automatically makes what they think your budgets should be based upon previous purchases, which you can alter as you see fit. I use my debit card a lot and never realized how much I really spend on gas until I started to use mint. You can set up goals, and alerts amongst many other things. I seriously recommend it to everyone.

    • Felicia

      If you spend a lot on gas you should look into ACME’s deal this week. My ACME is giving $10 gift cards if you spend $100 of gift certificates, and they have cards for shell, BP, hess, and more.

  • Jenn

    We do a small combo of almost everything here.
    We have a 4 month dry erase calendar that we use to mark SET things (like Pay day and Rent and Gas & Electric etc… So that we are not shocked when something comes up.
    Then as far as budgeting for our shopping trips go, we have set prices on the things we use, and WONT go below those set prices. To do this we have an App for our Android phones called Momento. At first it is a little time consuming, because you have to scan you stockpile. But once that is done, you can set how much you spent on everything, and it links to a google doc.
    So when you are planning your trips, and you see something that you already have or use all the time, you can look at your spreadsheet and see if you have spent less on it in the past, and while you are at the store, you can scan the barcode on an item that you think is a good price, and it will tell you what you spent on it in the past, so you really know if you are getting a good deal or not. Plus it keep a track of everything in your stockpile, so you know when enough is enough, or with perishable items you know when the expiration dates are. I have learned alot thru couponing, and the most important thing I have learned is it does not matter if you get 500 boxes of cereal for $0.10 each, if you can not eat them and they end up being garbage, then you have wasted that $0.10 each, that could have been distributed to something else. So a huge part of our budgeting is based on not over doing it at the store, EVEN if there is a great deal.

  • Christen

    I have been using the Dave Ramsey system for several years and really like it. The thing about budgeting is this — it’s YOUR budget. YOU have to make a decision about how much to spend and stick to it. My strategy and your strategy need not be the same. My strategy has changed over time, particularly since I lost my job a couple of months ago. If it’s really tight, this is what I would do:

    Use Excel and put your monthly income at the top of a column. Then start listing all the things that MUST be paid in order of priority. This includes mortgage/rent, utilities, insurance, car, etc. Which of these expenses you have will vary based on your living situation. Do NOT forget to put in categories for auto and home maintenance. At first, if you haven’t been budgeting, some of these will be wild guesses. It’s ok. It’s YOUR budget. YOU can change it, in cooperation with the other decision makers in your house. Once you deduct everything that must be paid, then you can figure out how much you have left for other categories.

    For me, I use cash in envelopes as a way of controlling spending. I can spend every dollar in the envelope every week, but if there’s no money, you can’t spend anything. I use the envelope for fuel, clothing, food (both groceries and eating out), and household items and toiletries. It has really helped me to stay in budget. And because I can spend it all, I don’t need to track it. If I find myself running short, I can keep records for a couple of weeks to see where I’m blowing the budget. It’s a good system for people who don’t like to track.

    • Christine B

      i use dave ramsey as well he is awesome

  • Danielle

    I try to keep my budget as simple as I possibly can. First I total up my monthly bills, then divide it by the number of times I get paid per month. That amount goes into checking. The remaining amount i keep in cash and put the grocery, gas,and walmart $ in envelope. Then I divvy up what’s left into a set amount of “walking around $” per day.

  • April S

    I use excel, and have been for a few years now. I start with the week the paycheck comes in, and underneath put all the bills due that week, then tally that up, then the amount of the paycheck, and then the remainder. That way I know what we have as pocket money for the week. If something comes up I just move stuff around, and once the item gets paid I just use strikethrough to denote it’s been paid.

    I also put a column to the right of the total balance due on credit cards, and how much is left after the payment for that month has been made, so if there is extra cash somewhere, like a month with 5 paychecks, I can put it towards credit cards to pay them off.

    We have a family of five, 1 16 year old, 2 year old and 8m old. We spend $200 every two weeks in food. That I also do in excel.
    Quantity | Description | Unit Price | Coupons | Subtotal

    I start with what we need, get the unit price either from the flyer or ShopAtHome, then I add in stock-up items, and then finally any good sale items until the total at the bottom equals $200. I re-sort it by aisle, print and bring it with me to ShopRite. This way I have the exact item description with me so I don’t buy the 6oz when I the coupon is for 18oz, etc. All my coupons in a envelope, printed list and PP card in hand and off I go.

    I’ve been using an excel sheet to do my grocery shopping for two years now, and I save them all in one workbook. At the end of the year I tally up the coupon column and I can see what (at a minimum) I’ve saved using coupons. Last year it was $700, but that was before I found this site. I can’t even imagine what this year’s is going to be.

    • Michele

      We use a very similar system. The only thing I can’t control with this budget is DH’s spending. Since couponing even if we spend more than last on hobbies we still can pay the card off each pay period/month.

  • Frances

    I use MS Money and its great. Keeps track of all upcoming bills, has budgeting tools and graphs to show where most of the spend is going each month.

    • Anonymous

      Is this free software or something you need to purchase?

  • Annabelle

    I tried to use Mint but my bank was not among those they participate with so I would have to wait until it is. I just bought 4 books about getting out of debt at the Borders that is going out of business so they were all 50% off. What I dont understand about a budget is this. Is it for what you have done that month or for what you will do? I have 2 expenses that are fixes…mortgage and car payment. I dont see how utilities are “fixed” because the amounts are different every month. How can you put an amount thar varies into a budget? I added up all my transactions for the past year to get my average in each category. But for vet bills there was a nearly $400 charge for a cat that was ill and had to be put down. Now that was an expense I had but wont have again so how or why do I use that? So confusing. When I figured everything I was in the negative by over $100 a month. So that tells me I dont make enough to cover the expenses I HAD but what about the ones I WILL have? Its so confusing to me I just give up trying to do it.

    • April S

      I usually plan 6 months out and then update the numbers as the bills come in. My gas is fixed because I signed up for equal payment plan, my cable and phone and electric are usually within a $10 +\- each month, except when the AC runs. Ugh.

    • Heather P

      Don’t give up… Think of a budget as a road map or a plan. You should actually estimate all of your monthly projected expenses along with your projected income. As you earn the money or spend the money, correct the estimated amounts to actual amounts. For varying amounts of utilities, estimate on the high-end. So if electric is $60 one month and $80 in your highest month, you might want to estimate $90 and give yourself a small buffer. As long as you do this with all of your recurring costs, you should have a good idea of what your monthly incoming and outgoing expenses are. As for the unexpected bills, that’s why it’s important to include an emergency savings fund into your monthly bills. List it as an expense just like you would a utility, but instead of paying it to a company, you pay “yourself” by setting it aside in an emergency savings account. It should only be used for emergency one-time type of expenses. So by factoring in a monthly amount of set-aside money, you can still budget for unexpected expenses. I hope that helps you!

  • Kristen

    I use mint! I think it’s great, if you have an iphone there is an app for it as well. I seriously don’t know what I’d do without it. Yeah some stuff doesn’t get sorted right, but every few days I go in and fix those things, it takes just a few minutes and I can do that from my phone.

  • Jessie

    Cindy, I’d be interested to hear what system you used to help you set up a budget and what you currently use? I want budgeting to be life saving for us too!

  • bobbi jo

    Think of budgeting as a tool that will allow you the greatest freedom you have ever known. Don’t allow yourself to be overwhelmed by so many “budgeting software programs” that you never start. I’ve tried dave ramsey’s on-line budgeting software and I liked them both, but found that an excel spreadsheet works better for my family. Start with a method that will work for you (and your family) and get to it! Don’t get frustrated if you don’t get it right away. You have to work at it, it can take some time to get used to it.

    My husband and I use two very simple spreadsheets each month for our zero based budget: the first is income – expenses. We list our monthly income at the top and then subtract all budgeted items. We try to make this list comprehensive so that there are no “surprises.” You can have as many categories as you’d like. Make it work for your situation. Don’t forget to include expenses that you incur quarterly, annually, etc (insurance, taxes, christmas, gifts, etc). For example, vehicle registration is $46.50 (paid once a year), the monthly figure is $3.88. Help yourself prevent disasters by allocating something to saving for an emergency, if you are able to. EVERY single dollar is given a job, there is no money that is left to disappear into no man’s land.

    Our second spreadsheet is what I call the “cash flow” plan. This spread sheet starts with the balance in our checking account and then lists the revenues & expenses in date order that are actually being paid. Basically, it acts as a calendar to make sure that our checking account is never overdrawn.

    There are no right or wrong answers; just make sure it works for you (and your family), is realistic and allows some flexibilty.

  • Claudia

    The best thing that works for me is an excel spread sheet. At the end of each calendar year I create a spread sheet for the next year and it goes like this:
    1. Wages (I put what I’m currently getting paid, sometimes it varies by a few cents depending on how they end up pulling the taxes, but I alway go with the lower number); 2. Mortgages (rent); 3. Thithes; 4. Utilities (I allocate a different amount each month based on the season. So for example, electricity in the summer my bills can get up to $75 so I will allocate $75, now for Gas I only allow $25 because I don’t use it much, only to cook.) 5. Emergency Savings Account (I look at previous years expenses that don’t happen on a monthly basis such as Car Registration, etc. and then I look forward and ask myself what kind of expenses do I foresee in the coming year and that would be things like, birthday gifts, bridal shower gifts, upcoming weddings, additional money for clothing or just small other things). This way when these things happen I have money saved there to pull from and it doesn’t throw my budget off. 6. Regular Saving; 7. Cell Phone Bill; 8.

    I’ve been doing this since I was in college and seems to be working for me.
    I used to use Money Works that used to come free with a dell computer (I loved it) but now you have to pay for it so I’m back to using Excel spread sheet. If you’re trying to figure out how much money you should be spending into some categories I used this website as a tool to set up my budget and figure out where I need to spend less.

  • Christine B

    I read a book called the total money makeover by dave ramsey he sets everything out for you on how to like within a budget and how to mpay off your debt and everything i got it a year ao and it totally helped me live within a budget and become debt free in a year