How to Make an Easy Budget and How to Make it Useful

Do you ever wonder what the point of a budget is and how to make an easy one? Here are tips on making an easy budget and making it useful!


Budgets are boring.  Making it fun is like trying to make taking out the trash seem fun.  There’s just no way to do it.  Worse yet, you spend all this time making them and never use them.

Is there a better way?  

You bet.  Here are tips on how to create a fast, easy budget.  Now, there are more powerful ways to budget, but let’s try to walk before we run, shall we?

Before we do that, I want to share an illustration that shows why budgets are so important.

Easy Budgets and Kaizen

The East River bottlenecks between Manhattan and Queens. Unlike its mighty sibling to the west (that’d be the Hudson), it can’t accommodate large cruise ships.

No one really gives it a second thought. No one really buys property there to overlook it. It’s just a waterway between Manhattan and Queens, but it’s going to be useful in helping you understand how to budget.

You may live life on your feet (or in the case of my L.A. and Atlanta friends, on your tush, stuck in traffic…), but your financial life is on a boat.

You’re steering your financial Sea Ray on the East River through the crimp point between the Upper East Side and Roosevelt Island when you encounter 3 large boulders in the water that force you to swerve left and right to avoid smashing a hole in your hull.

Remove those boulders and your next trip through is straighter and smoother. Another thing happens—the water level falls, in much the same way the rubber duck moves down a few inches when you take your child out of the bathtub.

When the water falls, it reveals medium sized stones. These medium stones have now become the big stones. Remove them as well and there will be pebbles left. Remove those pebbles and eventually your path will be open and smooth.

This is called Kaizen (Japanese for continuous improvement), popularized by Toyota, and it’s what the world’s smartest efficiency specialists (if “lean” or “Six Sigma” mean anything to you) use to make companies run better.

I’m going to help you apply it to budgeting.  Don’t worry, it’s easier than it sounds.

Why an Easy Budget?

It’s better for you to learn an easy budget that improves your finances than be scared away by a complex budget that makes you think it’s just too hard, so you never start.

Budgeting is important because it helps you know where you are and where you’re going. Want to predict your financial future? Can’t do it without a budget.

All the best companies in the world keep a budget, so let’s learn best practices from them. Your budget is the foundation of financial health, so approach it like you never have before by following these steps.

When your expenses are greater than your income, you have large boulders sticking out of the water. It’s not hard to identify them, you think. Let’s verify that.

  • Set up Your Easy Budget:  First thing I recommend is that you sit down and list out the following budget, estimating your monthly costs, like this:
Easy Budget (Monthly Basis) Estimated Actual Goal
Income (net take home pay)  $  $  $
less: mortgage/rent (include insurance / taxes)
less: cars (include insurance and gas)
less: food and groceries
less: other (everything else; include utilities)
=Income net of above expenses  $  $  $
  • Populate Your Easy Budget:  Once you’ve done that, go back to your last 3 months credit card and bank statements and average them out (since 1 month may not represent your typical spending) to see if your guesses matched reality. You’ll be surprised.

Depending on how far off you are, it should be a tip that the numbers in your head probably don’t match reality and that you need to abide by a budget.

(In a later post, I’ll show you how to live without a budget!  But master this easy budget first)

Before you enter anything in your “goal” column, you want to make sure it’s realistic.

So do these two things before you enter in your goals:

  1. Live off cash for a month. This is to reengage your association between what you have and what you can spend. For that month, just keep track of what you spend on food and gas for your car. Chances are, because you’re more cognizant of what you can spend, you’ll spend less. Everything else will be “other.”
  2. Open up a savings account with a new bank that you will never withdraw from unless there are extreme emergencies. It should be with a new bank because if it’s connected to your checking account, even though it’s easier to transfer money, it’s also too easy to withdraw from it. I want you to make it hard on yourself to ever access it for money. I recommend this because if your expenses > income, you probably have little savings for when emergencies come.

After that month, take your food number and make that your “food goal.” Add your gas number to your monthly car insurance and car financing expense. This is your “Car Goal.” You already know your rent/mortgage. Everything else gets added to “other.” This is called bottoms up budgeting. It’s not based on guesswork (which doesn’t work), but on how little you’re actually capable of spending in a month.

Now you need to do simple optimization on your budget by removing 4 boulders.

Remove these 4 common financial boulders:

  1. Credit cards. Open up a zero or low interest rate credit card and then transfer your balance. Go here to research cards. This does two things: 1) lowers your interest rate, and 2) makes your payments more efficient. When you have 6 different payments due at 6 different times, it increases the chances you will miss a payment and incur extra fees. When the low interest payment period runs out, open a new one and transfer that balance to the new one. Do this over and over again until you’re debt free. The smaller balance you have and more timely you pay, the better your credit rating and more lower interest rate cards available to you.  
  2. Cars. In the Automatized Age, it may be possible to go with only 1 car or no cars at all. There’s just too many options between public transportation, Uber, and biking to not explore it. (This will, admittedly, work best for our urban readers.)
  3. Food. There’s a lot of backlash against the “fewer cups of coffee” kind of advice because 1) some say it doesn’t work, and 2) it’s been said a million times and no longer a novel concept. Those who say it doesn’t work are not addressing situations where expenses > income and any amount of savings helps. Also, just because it’s been said before does not make it less true. There’s a good chance food ranks in the top 5 of your expenditures. Figure out how to eat in more. Brew your own coffee. Pack your lunch. Boring advice, but true. 
  4. Memberships. The most common membership is to your gym, but there are other ones you may belong to. Cancel them. Keep reading to the end to find out why it helps beyond your savings.

Now that you’ve removed these boulders, you will hopefully have some extra money at the end of the month. Take half of it to prepay your debt. Take the other half and put it into that new savings account.

You will be entering what I call the virtuous cycle:

More savings lead to more debt payments leads to lower debt payments leads to more savings.

You won’t notice much the first month or two.  But then slowly, you’ll start seeing very real changes in your credit card bill. Month by month, the cycle will grow stronger and stronger, and your chess pieces will overtake the opponent’s pieces.  Want to increase your chances of actually getting into and staying in a virtuous cycle?

No One Else Will Tell You This: Here’s the thing. When your expenses > income, you are oftentimes in this position for two reasons: suboptimal time management and low internal locus of control (more on that in a later post). You also have habit boulders.

Remove your habit boulders:

  1. Cut the cable TV cord. Good money management is good time management. And good time management is spent creating, reading, and doing instead of consuming. In fact, one question I use to gauge how serious someone is about taking control of their finances is whether they’re willing to cut the cable TV cord or not. If they give me excuses why they can’t, I know they’re not ready yet. How willing are you to change your habits?
  2. Run at least 2x a week. Start with 1 mile.  Then after each week, add a quarter of a mile until you get to 3 miles (or even more).  This is another weird one. Why am I suggesting this? Because I want you to get used to what it feels like to not want to do something (like budgeting) and then doing it. Then feeling great about having accomplished it.* It’s good for your physical, mental, and money muscles. Make pushing yourself a habit.

If your expenses are overwhelming, you’re paralyzed with fear. I’m trying to get you to literally move.  Stop sitting watching TV and start literally moving.  Align the intent of your body with the intent of your financial goals. There’s another virtuous cycle that I want you to enter:

Little wins leads to confidence leads to more wins leads to more confidence. 

So you see, budgeting by itself is boring.  Just numbers on a page. You’ll never stick to it if “budgeting is the key” is the only advice you get.

What I’m trying to do is remap your internal process from one of paralyzing fear and shame to doing and accomplishing.

Do these things and you’ll notice a change. Suddenly you have all the time in the world. Then? Suddenly you’re so much better at achieving your goals. Then suddenly, you’ve become financially healthy.

(Go here to learn how to budget when your expenses = income.)

*I hate running. I hate waking up at 6am, sticking my feet into my shoes, stepping out into the morning chill, and taking that first step. However, that second step I hate less, and the third less than that. There’s almost a declining marginal return of hate so that by the end, there’s a weird paradox  where even though I’m spent, I’m energized.  I love that feeling, and it sets up my day to go after some goals.  It never feels easy, and it’s not supposed to. But since I started in 2014, it has set in motion for me a lifestyle of seeking out challenges to overcome.  I want you to experience that  feeling as well!

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  • amileinmyshoes September 22, 2016 at 4:28 am

    Some fantastic advice here! I particularly like the description of how we hate running but are empowered and happy wee did it and how that’s how we’ll feel about debt – so true. We are lucky in that we don’t have debt t the moment but we do have a big project to work on in so will have to reign it in. You’ve inspired me to look at my account again, I think I have a few savings I can make.

  • amileinmyshoes September 22, 2016 at 4:33 am

    Reblogged this on A Mile In My Shoes and commented:
    This is a great blog I follow by a guy who has a vast knowledge of finance/budgeting. How to get out of debt and stick to a budget. Worth a read.

    • justmakingcentscom September 22, 2016 at 11:26 am

      Whoa! Thanks so much for reblogging this post! It encourages me more than you know!

      • amileinmyshoes September 22, 2016 at 12:27 pm

        No problem, I think it was a good one to share with others! I would have asked you but I thought it would be your sleep time 🙂

    • justmakingcentscom September 22, 2016 at 9:27 pm

      You can repost my stuff anytime you’d like!

  • NothingImportant2Say September 22, 2016 at 10:01 pm

    All good sound advice!

    • justmakingcentscom September 22, 2016 at 10:19 pm

      Thank you! And happy to see that you wrote a new post about one of my favorite things in the world: dogs!

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  • lindsayylyall October 21, 2016 at 9:58 pm

    I love the Virtuous Cycle concept! It is a cycle of Awesome leading to financial freedom with only a few simple steps. It’s brilliant.

    • justmakingcentscom October 22, 2016 at 3:39 am

      Hi Lindsay,

      Thanks for dropping by! I like how you call it the “Cycle of Awesome.”

      Let’s team up on something soon!

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