In this guide you'll learn
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Whether you get paid a regular salary or have an irregular income, you need to look at the month ahead and figure out what you have to work with. This includes any money you earn—money from paychecks, side jobs, or even a yard sale. If it's money coming into your bank account, list it as income.
Next, identify your regular monthly expenses. Start by covering your fixed expenses like your mortgage or rent, utilities, and other bills.
Next, list your essentials like food, transportation, and clothing. If you're not sure what you spend on your fixed and essential expenses, we recommend checking your last few bank statements to see how much you typically spend in each category every month.
Now on to the fun spending—take a look at your calendar for the upcoming month. What plans do you have? Factor in expenses like dinner with friends, concerts and school field trips. What else do you spend money on? Don’t forget gym membership fees, coffee runs and everything in between. Remember to factor in personal spending money too. Being on a budget doesn’t mean you don’t get to have any fun! You just have to account for your financial goals and other priorities first.
Now that you’ve accounted for your income and expenses, you should have zero dollars left to spend. If you haven’t made it down to zero yet, adjust your budget until every dollar is in a category—that’s your number one goal when creating your budget each month.
If you’ve listed all of your expenses and have money left over, use it toward one of your money goals—like creating an emergency fund, paying off debt, or saving for retirement. By giving every dollar a job to do, you’re ensuring every dollar is accounted for and working for you and your goals. That’s EveryDollar budgeting!
We believe in giving. Always. Tithing to your church, donating to charities, supporting worthy causes—even if you’re in debt. It may sound crazy, but it’s actually legit. Generosity shifts our focus off of our problems and our financial shortcomings. And when you share your income, you appreciate it more. Contentment doesn’t come when we have enough—it comes when we see that what we have is enough. When you give, everyone wins. We recommend giving 10% of your income.
Now that you’ve created your budget, it’s time to follow through. While you’re out and about buying groceries or eating at restaurants, be sure to track your transactions. When you keep up with your spending, your budget keeps up with your life.
Remember, this is your budget. This is your money. Make both work harder for you with Ramsey+. Our premium budgeting tool connects to your bank, streams in your transactions, and now gets you access to Financial Peace University, our motivating nine-lesson class on how to crush debt, save, and build wealth.
Saving money should be a key part of your budget each month. You need to pay yourself before you send all your money right back out the door; you work too hard to have nothing to show for it! That’s why it’s important to have an emergency fund. When you have an emergency fund, you wonʼt need to rely on credit cards and loans when something unexpected pops up. This money can help cover unexpected events like hospital visits or water heater malfunctions.
We recommend starting with a beginner emergency fund of $1,000. This will cover most small expenses that pop up, so you don’t bust your budget when you blow a tire on the highway. But if you’re debt free, we recommend saving three to six months of expenses. This doesn’t mean three to six months of your take-home pay. Look at the expenses you have to pay each month like your mortgage or rent, utilities, and food. Having a fully funded emergency fund will be extra protection in the event of a job loss or major medical event.
It’s important to factor future expenses into your budget. Create a savings fund, and you’ll be able to save up for a large expense over time. For example, letʼs say itʼs February and you plan to spend $800 on Christmas shopping. You have about 10 months to save, so if you put aside $80 each month, you’ll be ready to go in plenty of time for Christmas! We recommend keeping this money separate, so it doesn’t get spent on something else. You can use a simple savings account at your bank or even store your saved cash in a cookie jar. As you make your budget, look a few months out to see what expenses are coming that you may need to save for over time. Home repairs or remodels, vacations, and car replacements all fall into this category. Build those into your monthly budget so they don’t sneak up on you.
If you want to retire comfortably, the time to begin saving is now! Of course, you donʼt want to overextend your budget in the process. Thatʼs why we suggest investing 15% of your income into good growth stock mutual funds split among growth and income funds, growth funds, aggressive growth funds, and international funds. Itʼs the perfect balance between what youʼll need tomorrow and what you can afford today. The sooner you can budget for your future, the better off your future will be.
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You can save for what you want a lot faster—and have more room in your budget—if you get your debt out of the picture first. We recommend getting rid of your debt as quickly as possible, because debt holds you back from reaching your goals. It’s like wearing ankle weights during a race.
Picture a snowball rolling down a hill at high speed. It starts small, but with each turn down the hill, it adds another layer of snow, growing larger and larger and gaining momentum. By the time the snowball reaches the bottom of the hill, it looks more like a boulder than a ball.
This is the theory you’ll apply to paying off your debt. You’ll start small with focused intensity. Over time, you’ll gain momentum. You may even surprise yourself with how quickly you crush debt after debt on your way down.
We recommend starting to pay off your debt once you have a $1,000 emergency fund. With your emergency fund in place, you’re less likely to take on any new debt.
We recommend using the debt snowball method to pay off debt. With this method, you pay off debts in order of smallest to largest, gaining momentum as each balance is paid off. When the smallest debt is paid in full, you roll the money you were paying on that debt into the next smallest balance. It looks something like this:
In your head you might decide, This month I’m going to make coffee at home every morning so I can put more money toward Christmas. But two days later it’s 7:45 a.m. and you’re running late. You know you’ll pass right by Starbucks on your way to work so ... you do what we’ve all done. And you pledge to do better tomorrow.
Well today we want to share a little tip: You can prepare for any budget temptations, challenges or confusions simply by teaming up with a like-minded pal.
For married folks, the answer is easy enough: Your spouse brings built-in accountability. If you’re worried because you two are completely different from one another, don’t be. That’s actually a good thing! Savers and spenders, for instance, help balance each other out. The key is to agree on your financial goals and on the plan for reaching those goals.
If you’re single, we suggest choosing a trustworthy friend or family member who will treat your personal information with care. You want someone who will tell you what you need to hear—not what you want to hear. Be sure to state up front what you’re looking for in an accountability partner to determine if they are willing and able to make the commitment.
No matter how you feel about budgeting, you and your spouse can still work together to make a great budget you can both agree on.
Think about what financial goals you want to achieve in the next six months, over the next year, and further down the road. Write them down and share them with each other. Do you want to build a home? Pay for your children’s college? Retire at 55? Having these goals in mind will help prioritize what’s important as you create a budget.
Donʼt get discouraged if the budget takes a little time to master. The first month, there’s a good chance your numbers will be off because you’re brand-new to budgeting. The second month, your budget may still be off, but it should look better than the last. By the third or fourth month, you should begin to get the hang of your budget. Be patient and have grace as you move through this learning curve. The results are worth it!
This is where discipline comes in. When your budget is set, donʼt break it by splurging on something you and your spouse haven’t talked about beforehand. If you need to change a budget item, it’s a good idea to check in with your spouse or accountability partner. Budgeting is a team effort, and it takes lots of communication. Talk early and often.
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The word budget gets a bad rap. It can be synonymous for cheap, boring or even killjoy. But that couldn’t be further from the truth! Here are some budget myths we wish would go away:
In fact, a budget propels you forward. Maybe you were once stuck spending half your paycheck on takeout food. But now you have an emergency fund and are saving for retirement! Now, the next time you splurge on pad thai, you can do it completely guilt-free. Well, except for the calories ...
You’re in control of your budget—not the other way around. If there’s something you want to do, budget for it! A budget gives you the freedom to do whatever you want (within reason). Ready for a vacation? Need a massage? Itching for a new pair of shoes? Simply work it into the budget and reduce another spending category to even things out.
Your budget isn’t a rock. It’s a changeable, flexible tool. Just because you could only spend $50 on entertainment last month, doesn't mean you can’t turn around and budget $200 next month. Your budget will ebb and flow along with your lifestyle.
Fun fact: It takes longer to brush your teeth in a month than it does to make an EveryDollar budget. That’s because all you have to do is plug in your income, expenses and savings goals. We do the math for you. Ten minutes right now better money management for 30-plus days! That’s some phenomenal return on investment.
Now that you’ve got budgeting basics down, here are tips from EveryDollar budgeters so you’ll be budgeting like a pro in no time.
1. Trying is better than not doing at all. Try. Some people get so overwhelmed getting started that they don’t bother. I found it rough to start but very rewarding once we stuck to it! — Abbey S.
2. It gets easier. The first few months will be rocky and frustrating, and you will overspend. But keep doing it; it gets better. After budgeting for more than a year, I started having money left over. That’s an awesome feeling. — Jen S.
3. Budget for the unexpected. My husband and I learned we needed a “Miscellaneous” category in our budget. My daughter was invited to the zoo, and we didn’t know which category to pull from. Now, each month we budget a little money for those odd purchases. — Telma L.
4. Be flexible. Flexibility is the greatest part of EveryDollar. Need to add $100 to a category? Pull from another category. Don’t need $20 extra for clothes this month? Add that money to a different category. Your budget isn’t there to tell you how broke you are or what you can’t do. It allows you to control where your money goes. — John C.
5. Teamwork keeps you focused. Budget together! If you’re married, it should be both spouses. Singles should have an accountability partner. That means you have someone to remember all the things you forget to include! —Alexis F.
6. Set aside some fun money. Don’t forget to budget in fun money, whether it’s for date night, eating out, or shopping. If you don’t, you’re going to feel restricted (especially if you’re the free spirit. — Kerry R.
7. Know your trouble spots. Food is my weakness, so being diligent about making a plan so I didn’t have food “emergencies” was key. This applies to any category where you tend to overspend. — Alexis F.
8. Create separate categories for big spending areas. Break categories down as small as you can to stay on top of them. For example, I had “Pets” under “Lifestyle.” After making changes over the course of a year, I now have “Pets” as its own category with line items for a pet sitter, food and treats, veterinary care, and medicine. It makes planning for each line item easier and keeps me accountable for where the spending really is! — Jennifer M.
9. Keep a running list of upcoming expenses. I keep an ongoing list of special things coming up over the next few months. This helps when we are working on the budget, because I have the extras for that month already top of mind. — Allison G.
10. Give yourself time to plan each month. Set a reminder in your calendar for the twenty-fifth of each month. That gives you at least five days to sit down and do the next month’s budget — Cassie O.
Now that you’ve learned the keys to budgeting, it’s time to get started with a solid budget of your own. If you get overwhelmed at any point during the process, use this guide to help you move forward. Give yourself (and your spouse!) lots of grace as you figure it out. When you take control of your money and track your expenses, you gain so much more than money. You gain peace of mind. And isn’t that what we’re all really after? Make it happen with a budget that works!
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