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Budgeting may seem so difficult, but it really doesn't have to be. The old method of figuring out and following a monthly budget just doesn't work anymore. By using that method, you may find yourself in trouble financially. Instead of creating a traditional budget, the best method for your financial planning is a simple spending plan that sets aside a specific amount that you can spend each month. This might be the best way to save money.


Using a spending plan instead of a budget can actually help you save more money. Not only are you able to save more money, but the spending plan is much easier to figure out each month than the old budgeting method. By using a simple spending plan, you can make sure all of your bills are paid on time and still have spending money to use. All of this happens while your savings account grows, as well.

By focusing on how much money you can spend instead of completely restricting yourself, you are less likely to make impulsive purchases that you will regret. You will know exactly how much you can still spend and decide if each purchase is worth the cut to your spending money. The key is to have a specific amount set, so that you know when you are coming close to overspending.



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What is a Simple Spending Plan?

Using a simple spending plan, you can pay all of your bills on time, pay off debt, save money, and still spend money on extras. Traditional budgeting tends to be mentally stressful and can cause unnecessary financial stress. While money and bills are already stressful, a traditional budget only makes the stress worse instead of better, all while causing you to have less money.

Basically, instead of working so hard to budget your bill money in the traditional way, a simple spending plan focuses on how much money you can spend. Once you have set aside your bill money, the only money you have to worry about is your spending money.

Typically, 50 percent of your after-tax income should be for necessities, 30 percent should be for wants (cable, Netflix, lattes, and other personal desires), and 20 percent should be for saving and lowering debt. The 30 percent money that is allocated for things that you want would count as your spending money.

How to Make a Budget and Save Money

Why You Need a Budget

By creating a budget that works for you, in this case a simple spending plan, you can make sure that all of your bills are getting paid on time. This avoids late fees, cancellations, and negative marks on your credit score.

How to Make a Budget and Save MoneyIn order to prevent all of those things from happening, you need to make sure you have created and implemented a plan that works for your family. A budget helps keep all of your spending in order, and makes it easier to avoid being short on cash at the end of the month or pay period.

Without a budget, you will have no way to know how much more you can afford to spend each month. You might not know how much you need for bills and other normal expenses if you don't have a plan to follow. In all instances, having a budget or spending plan is beneficial to your financial situation.

Financial problems cause so many issues, and all of those problems could be eliminated if you used a spending plan instead of a traditional budget. Aside from just being stressful, financial problems cause a slew of problems including:

  • Anxiety
  • Depression
  • Heart attack
  • Digestive problems
  • Weight gain or loss
  • Diabetes
  • Insomnia
  • Psoriasis
  • Cancer
  • High blood pressure
  • Alcoholism
  • Opiate abuse
  • Divorce
  • Domestic violence

How to Make a Budget in 6 Steps

1. Set up three separate bank accounts – one for bills, one for spending, and one for saving

This may sound tedious and unnecessary, but it is so helpful when figuring out your spending plan. The account for bills should only have enough money for bills for the month, and the money in this account should be used for nothing else.

The spending account should be a checking account so that you can use a debit card. This is the money that you are allowed to spend that month on things such as food, gas, clothes, wants, and anything else that isn't an actual bill.

Then if you don't have one already sign up for the best online savings account you can find. The savings account is to just store the money that is leftover after bills and other necessary spending, which is where the savings aspect comes into play. It is important to not ever touch this account except to deposit money. If you are constantly dipping into the money in this account, you are preventing yourself from accumulating savings and the account basically becomes pointless. We recommend looking at American Express personal savings accounts to accomplish this.

2. Determine your monthly bill cost and subtract it from your total take home pay

Before you can determine how much money you have available to spend, you have to figure out how much your bills are every month. You can do this by writing out every bill you have, the due date, and how much that bill costs. Add up all of the amounts, and that is how much money you need to have in your bill account each month.

The bills you should be including in this total include:

  • Mortgage or rent
  • Utilities
  • Phone
  • Insurances
  • Car
  • Credit card payments
  • Loan payments
  • Investments
  • Internet and/or cable
  • Child care

You should also account for the amount of money you typically spend on groceries and gas, although that will count as spending money.

What if you have a job that pays based on commission or per job?

Of course there are jobs that don't have a set amount of pay each pay check. These would be jobs that are based on commission, or on a per-job basis. If you are paid per hour and your hours tend to fluctuate, you also may want to plan a little differently.

For these types of jobs, you should plan a budget that allows for more saving. This way, when business is slow or your hours have been cut, you will have a little more of a cushion if you fall short one month due to less work.

How to Make a Budget and Save Money

3. Set all of your bills to autopay

Once you have the money in your bill account, set all of your bills to autopay. This saves you from late fees for forgotten bills, and also saves you from having to take the time to pay all of your bills each month. You would simply have to check and make sure that all of the bills came out of the account at the correct time.

Another bonus to using the autopay option is that many companies offer discounts to customers who use autopay to pay their bill. It is worth looking into, saving you even more money.

4. Give yourself a spending allowance

Once you have enough money in your bill account to cover all of the bills for the month, you can give yourself a spending allowance. You can decide to put a set amount in your spending account each payday, or you can figure out a percentage to put in your spending account. Either way, make sure you still have a majority of that money leftover for saving.

Throughout the month, keep an eye on your spending allowance. Remind yourself to stop spending so much if you have used up a large amount of the spending money and the month isn't close to being over yet. The last thing you want to do is use up all of your spending money half way through the month and then find something you really want to buy. When this happens, you may be tempted to cut into your savings account, which would negatively impact your plan.

5. Plan ahead for holidays and other special events

Christmas, birthdays, weddings, and other events are going to happen. Since you know you will be spending money on these events, you should plan for them at the beginning of the year. Determine how much you think you will be spending for each event. Take the number you came up with and divide it by the number of months until the event. You need to set aside that amount of money each month so that you aren't cutting into your bill money, spending money, or saving money.

If planning for how much to save each month seems daunting to you, figure out the number of weeks until the event, instead. Sometimes seeing the smaller amount each week is easier to manage than a monthly amount.

6. Put the rest in the savings account

Now is the time to start racking up the savings. The money leftover after bills and spending should be put into your savings account or you can look for the highest money market rates and go that route. This is not extra money for fun or random shopping, it should be saved for emergencies and investing. The only time you should even use this account is when you are depositing money each pay day.

By not cutting into your savings account for any frivolous purchases, you can have a money buffer incase someone loses their job or a major illness happens. Plus, if something unexpected happens such as a vehicle breaks down or you need to buy tires or your furnace needs to be replaced, you'll have money available to take care of the problem.

7. Track your spending

The best method for tracking spending is doing it online. Many bank accounts can track spending for you, saving you the time of writing out everything you purchase. By simply enrolling in online access to your bank account, you will be able to see how much more you can spend and what you have already spent money on.

There are money saving apps that can break down your spending habits a little more, and even allow you to determine how much you should be spending on certain things each month. It is important to see where all of your money is going. Figure out the best budget app that can help you in this situation.

When you are tracking your spending online, you cannot carry cash and use that for purchases. When you begin paying with cash, you will have to revert back to manual tracking of your spending. With digital tracking, you must use your debit card for all purchases. Try looking at Digit app reviews and Personal Capital to see if it can help you out.

If personal finance software isn't for you, you can try the cash and envelope method of tracking your spending. For this, you use envelopes for your spending money. You can separate it into different categories by using different envelopes, or you can just keep all of your spending money together in one envelope. You will want to jot a little note about what you spent the money on, but you can write it straight onto the envelope. Then, you will watch for the spending money to get low and force yourself to cut back on spending.

By keeping your spending money separate from bill money and saving money, you can prevent yourself from accidentally overspending. With this spending plan, you will be able to avoid late fees, overdraw fees, and damage to your credit score.

How to Make a Budget and Save Money

How to Save Money

With the spending plan, saving money is actually easy. You won't be dipping into your savings account or bill money for purchases, which prevents you from getting behind on bills or using up your savings.

With this being the case, you also won't be paying late fees and overdraft payments, which both cause you to need more money for those bills. Sometimes, an employer may be able to automatically deposit a set amount or a percentage of money into a different account than the rest of your paycheck. This prevents you from be tempted to keep it for spending one month.

In addition to simply planning for savings each pay period and leaving the savings account money alone, there are other ways to save even more money. Some of the ways to save more money include:

  • Avoiding new debt

Try to pay for things up front. If you save up for a new car instead of taking out a loan, you will save money in the long run. The same goes for buying things like furniture and home improvement projects; you should avoid putting the cost on a credit card and instead pay for it all up front.

  • When new debt is unavoidable, give the biggest down payment possible

Debt is unavoidable when it comes to things like buying a house. In this case, you should save up and give the biggest down payment you possibly can. When you give a bigger down payment, you can pay the loan off more quickly. The longer it takes to pay off a loan, the more you end up paying in interest, so it is best to pay it off as fast as you can. You payments may also be smaller if you give a larger down payment.

  • Have small amounts of money automatically transferred to your savings account

Some banks offer the option of rounding up to the nearest dollar every time you make a purchase and putting the extra change into a savings account. It may not seem like much at the time, but all of this extra change being saved will quickly add up.

  • Order smaller portions when you eat out

This is another easy way to save a little money. The portions given at restaurants are normally larger than necessary, anyway. If you order an appetizer instead of a full meal, you will likely still be full, and you will have saved some money.

If you are dining out with someone, you could even share a full meal with them. Ask for an extra plate so that you can split it all up. And don't forget about restaurant coupons which can really help.

How do You Know How Much Money to Save?

When determining savings, you should usually aim to save a certain percentage of your income each month. There will be months when you can't save as much, and that is okay.

It is important to determine, based on your age and the amount of money you want to retire with, how much you need to save each month for retirement. No matter what percentage you choose to save, you should always manage to at least put in the amount you need for a comfortable retirement.

Saving for emergencies is important, as well, because you don't want to scramble to come up with money for those. An emergency would cut into your the savings you have worked so hard for.

What to do When You Don't Have Enough Money Leftover for Spending

Sometimes money gets tight. It happens to everyone at some point. The important thing is finding a way to fix the problem.

When you figure out how much your bills cost each month and then subtract that number from your monthly income and the number comes up negative or just a couple of dollars in the positive, it is time to re-assess what is going on.

First, look at all of your bills and figure out if you can lower any of the amounts or completely cut some of the frivolous things such as cable. Some of the other extras that you could cut from your budget may be:

  • Internet
  • Monthly subscription boxes – you can easily look for free cable TV.
  • Music memberships such as Pandora or Spotify

Another way to cut expenses is by looking at things such as groceries and gas. Sometimes you may be able to save money by not driving as much or eating cheaper food options.

Once you have looked at extra expenses you can cut from your bill amount and changed anything that you could, you could look into remortgaging your home. By doing this, your monthly mortgage payment may be lowered. Finally, you should try to find extra ways to make money. Ways to make extra money may include:

  • Refinish furniture
  • Find a freelance writing job
  • Babysit
  • Take surveys online
  • Rate ads for money online
  • Delivering groceries

Final Thoughts

Creating a financial plan and following it is an important step in reaching your goals. A budget is a great place to start, although a traditional budget is a little outdated at this point. Instead, following a plan that focuses on spending will make it easier to stay ahead of bills and accumulating new debt.

By determining how much money you need for bills each month, and using what is leftover from your income for savings and spending, you will be able to create a spending plan that works for your family. You will be able to pay all of your bills on time. You won't have to pay lay fees and overdraft penalties, and you won't have to worry about overspending each month.

Even when it seems impossible, there are ways to get out of debt and start saving money by following a budget that targets spending instead of restricting. Meanwhile, you will be saving money to use for emergencies and retirement. It isn't difficult, it just takes a little planning. You may even ask, how much do I need to retire? You always have to plan ahead for these things.


Going on a budget is intimidating. You’re used to spending money left and right, and suddenly you have restrictions. The good news is, budgeting can be done and will save you tons of money in the long run. In this section, we aim to answer all of your questions when it comes to budgeting.

General FAQ

You’re curious on how you can start implementing your budget, but you have so many questions! We’ll answer questions regarding what a budget is, how you can start your budget, and what mistakes some people make when budgeting.

How to make a budget?

Creating a budget is simpler today. You can use Excel spreadsheet templates (found directly in Excel) or even download an app that tracks your spending and creates a budget for you.

What is budget?

A budget is a way to organize your finances. By writing down your expected income and expenses for the month, you can better see in which areas you can save money.

How to budget and save money?

When budgeting, it’s important to designate space for your savings. Cut back on areas where expenses are high and put that money towards your savings instead.

Which payment type can help you stick to a budget?

Physical cash is the best payment type to stick with when you are on a budget. This is because you’ll easily notice how much money you have left in your wallet.

How to make a budget in excel?

Excel makes it easy to budget. When you open Excel, you’ll immediately find multiple templates you can use to make your budget.  Just fill out your expenses and Excel does the summarizing. If you're trying to save money for taxes then you may want to check out the best tax software 2020 has to offer and make this job a lot easier for yourself.

How to make a budget plan?

When making a budget plan, it’s important to plan out all of your expenses. Take into considerations payments that are only needed annually or biannually, like your insurance.

Why is budgeting and monitoring credit important?

Budgeting is important because many people spend money without realizing how much they spend. Once you map out where your expenses are, you begin to see where your money is going. Its also important to keep an eye on your credit report since it effects how you can borrow. Using a service like Credit Sesame can help with this. Read more: Is credit sesame legit?

What is the purpose of a budget?

The purpose of a budget is to identify where you can improve your spending. For example, you can find you spend too much on eating out every day, and you can decide to take lunch from home instead.

How to set a budget?

To set a budget, set a limit on yourself on how much you can spend. For example, you can set a limit of $200 on clothing every month if you have a tendency to buy a lot of clothing.

How to live on a budget?

To live on a budget, check your budget consistently to ensure you’re following it. Use apps that help easily track spending and also tell how much spending money you have left.

How to budget your money the 50 20 30 rule?

When it comes to budgeting, the 50 30 20 rule says you should spend about 50% on necessities, about 30% on wants, and about 20% on savings and debt relief. Some say that that 20% should be investing too. We suggest reading this Ally Invest review and see if its a good investment option for you.

How to stick to a budget?

The best way to stick to a budget is to set realistic goals. If you say you’ll only spend $100 on food, but you usually spend four times that, you won’t stick to your budget for long. A savings account that you don't touch can also help with budgeting. In fact check out the best cd rates 2020 has to offer.

How to make a monthly budget?

You can start making your monthly budget by first seeing what you usually spend in a month. Take those numbers and adjust them according to your goals for the next month.

What is flexible budget?

A flexible budget is one that’s not too strict on your spending. For example, you can set a budget of $100 for entertainment, but it’s okay if you spend $120.

How to budget in college?

If you’re paying out-of-pocket tuition, now is the best time to budget to afford college. Start by allocating enough money towards paying for college, then make room for the rest. Don't pay for expensive TV services but instead use online streaming services. Check out the current Hulu Live TV price and compare it to Netflix for example. There are many ways to cut expenses though and this is just a couple areas. Another popular thing to do is to sell used textbooks once you're done with them.

Which of the following is not a benefit of budgeting?

One of the downsides of budgeting is having to spend time planning how you’ll spend your money. However, it pays off in the long run when budgeting begins to save you money.

How to budget money on low income?

People with low income are the people who need to budget the most since they need to be careful how they spend their money. Start by carefully deciding where your money should go. You could also work on building up sources of residual income to get out of the rat race.

What is the best budget app?

There are many great budget apps out there. When looking for a budget app, look for one that can connect to your bank account and read your purchases to make budgeting even easier. Some investing apps can help you save too. Take a look at our Robinhood Investing review for example. Then there are apps that make money if you're looking for more ways to bring in more money.

What's the main reason to use a personal budget?

The main reason to use a personal budget is to set aside money for your goals. If you’re planning on going on vacation, college, or just want money for retirement, budgeting can help.

How does a monthly budget worksheet help you?

A worksheet, such as one you can build in Excel, can help you by categorizing your spending. When summed up, you can see what categories you spend most and need to cut back on.

What is a common mistake made in budgeting?

One common mistake when budgeting is to try to cut spending too low. If you’re used to spending hundreds on entertainment and suddenly you can only use $50, you’re bound to break your budget.

What is a characteristic of a successful budget?

A successful budget is one that allows you to save money towards your goals. Most people simply aim to increase their savings, and so a successful budget would be one that consistently increases their savings.

How to budget biweekly paychecks?

Make your biweekly budget by adding up your expenses and income for two weeks. Decide to cut back on areas that you spend too much and allocate more money towards areas like your savings. Don't forget to keep track of those taxes and if you use tax help software it will make it a lot easier.

Why is it important to budget some money for entertainment?

You should be reasonable when creating your budget, or else you might stray away from your budget. Most people do spend a portion of their income on entertainment, so it’s important to add it in.

How to budget for tax season?

If you're newly self employed and running a business its easy to forget you need to save money for quarterly taxes. Talk to a tax advisor to see what this number will be so you're not caught off guard. Using a service like the Freetaxusa 2020 version can perhaps help you keep track of all this too.

Buying Food on a Budget

Chances are, one of your biggest spending is on food. Whether it’s going out to eat every night, or simply buying way too much at the grocery store, it’s an area that can be greatly improved upon. The following is how you can start saving on your food spending.

How to eat organic on a budget?

Your budget shouldn’t stop you from eating organic. Try ordering your organic food in bulk to cut their costs, and be on the lookout for coupons you can use to drive prices even lower.

How to eat healthy on a budget?

A budget doesn’t mean you have to cut back on healthy eating. In fact, you can budget to better afford healthy eating. Use your budget to cut back in other areas.

How to be vegan on a budget?

You can be vegan on a budget by first preparing your own meals. Avoid eating out to save yourself quite a bit of money. Also, buy your vegan food in bulk to get it at a cheaper price.

How much to budget for food?

It’s recommended that you budget about 11% of your income towards food. To get a more accurate number, record what you already spend on food and adjust it accordingly. If you order food in a lot then take a look at our Ubereats vs Doordash review.

How to lose weight on a budget?

If you want to eat healthy on a budget, start by buying your healthy food in bulk to save you money. You can also try skipping the gym and working out at home.

How to grocery shop on a budget?

You can grocery shop on a budget by predetermining how much you will spend on each category of food. This way, you’re less likely to overspend when you’re at the grocery store.

Planning Events on a Budget

Your budget shouldn’t stop you from life’s events. You can stick to your budget while setting aside money towards your upcoming event, be it a baby shower, wedding, or a vacation to Europe.

How to plan a baby shower on a small budget?

You can cut back on your baby shower spending by hosting it at your house or a local park (instead of an expensive restaurant) and doing activities that won’t break the bank (like playing shower games, for example).

How to travel Europe on a budget?

Traveling to Europe can be expensive, but not if you plan it right. Look for sites that offer package discounts when you buy your airplane tickets, hotel and even an event together.

How to plan a wedding on a budget?

A wedding can be a very expensive event. By creating a budget first, you can plan the cost of each aspect of you wedding that fit your budget and eventually save a lot of money.

How to budget for a vacation?

When you’re planning on going on vacation, you can begin saving up by allocating money every month towards the vacation. This usually means cutting back on other areas.

How to travel on a budget?

Traveling on a budget is possible; you just have to plan for it. When creating your budget, make sure to set aside a portion of your money towards your trip.

How to budget for a baby?

A baby comes with a lot of expenses. It’s estimated about $700 a month is spent on a baby in its first year. Add that estimate to your budget and adjust your other expenses accordingly.

Cut Costs on Projects FAQ

Being on a budget doesn’t mean you can’t redecorate your home, redo your kitchen or even landscape your backyard. It’s a matter of doing what you need to do at the lowest price possible. This section answers your questions on how you can make that happen.

How to decorate a small apartment on a budget?

The cheapest way to decorate your small apartment is to build it yourself. Follow online tutorials on how to build shelves, tables and even chairs to maximize your savings.

How to decorate a wedding reception hall on a budget?

You can save money on your wedding reception decorations by going with atypical decorations. For example, try using white Christmas lights as a beautiful addition, or tie ribbons onto your chairs instead of using seat covers. Some people will get wedding loans to pay for all these expenses. If your score is keeping you from getting approved for such a loan take a look at the credit repair services reviews we recently published.

How to decorate on a budget?

You can decorate with your own DIY projects. From creating your own wall art to creating an accent wall, you can save a lot of money creating decorations yourself.

How to redo kitchen cabinets on a budget?

Redo your kitchen cabinets on a budget by doing it yourself. Paint your cabinets yourself to make them look new again and buy your knobs and pulls in bulk to save money.

How to decorate mid-century modern on a budget?

You can get the mid-century modern feel you want without breaking your budget. Try looking for your furniture at thrift shops or even online, where the prices will be significantly lower.

How to build an off-grid cabin on a budget?

You can save money on your off-grid cabin by buying salvaged or affordable pieces from Habitat For Humanity. This includes things like windows, doors, trims, flooring and so on.

How to update an old kitchen on a budget?

Update your old kitchen by first repainting, as it’s the cheapest option and what’ll make the most difference.

How to build a bunker on a budget?

A bunker is an expensive project that you shouldn’t make cheap. Instead, plan ahead and start setting aside money now towards your bunker. A quality bunker will be worth the wait.

How to decorate a house on a low budget?

Start by getting rid of old, damaged items that could be damaging your home’s appearance. Also try waiting for furniture to go on sale, or shop through yard sales and sites like craigslist to find good deals.

How to remodel a bathroom on a budget?

Remodel your bathroom on a budget by limiting the number of tiles you use (as they’re expensive) and instead painting most of your walls. Also, you can buy fixtures, toilets and showers used and save more money.

How to budget for a house?

To budget for a house, you should take into consideration all the expenses that’ll come with the new home. It’s recommended that you don’t spend more than 25% of your income on housing expenses. Looking for ways to earn money from home is another great way to budget for a house.

How to landscape a steep slope on a budget?

When landscaping a steep slope, consider that soil erodes downhill. When you’re on a budget, you can use groundcover plants (one to two colors for best effect) to root into the soil and prevent erosion.

How to build an outdoor kitchen on a budget?

The first way to save on building an outdoor kitchen is to avoid contracting a professional. Instead, look for DIY tutorials to build your own kitchen for a much cheaper price.

How to build a home bar on a budget?

A ready-made home bar can be pricey to buy. You’ll be surprised you can turn some of your current possessions into a home bar. Look online to create a home bar out of anything from bookshelves to pallets.