Creating A Budget That Actually Works

May 2, 2019

A step-by-step process for creating a budget that works, AND I share my actual monthly spending! Take a peak inside my finances.

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I believe a happier life can be achieved through mindful money habits. It's not just about how much money you make; it's about how you use it!


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A step-by-step process for creating a budget that works, AND I share my actual monthly spending! Take a peak inside my finances.
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I wanted to call this “I’ll show you mine if you show me yours [budget style]” but decided if anyone stumbled across this article after googling that statement they would be sorely disappointed! Instead, lets talk about creating a budget that actually works. I’ll explain the exact steps I follow, and at the end show my real monthly budget!

creating a budget that actually works
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Does he look life he’s laughing or yawning to you? I aimed for laughing!

Jokes aside, I’ll admit this article is a little nerve-wracking to write. I plan on discussing exactly how I budget (and why!), including what I spend each month. Talking about specific amounts of money always feels a little bit awkward, and like it opens you up to judgement. So why am I doing it? Simply put, this is the easiest budget method that I have ever found! I’m hoping that sharing how I manage my money will help others to do the same.

You may disagree with some of the areas or amounts of money I spend.

That’s okay! I would likely disagree with some of your spending as well. It’s called personal finance for a reason. We all get to have different priorities and goals in life. Your budget should be a reflection of your life, not mine!

creating a budget that actually works
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I’d like to suggest that everyone (regardless of how little or much you earn) should be on a budget. Don’t think of it as the thing restricting you! When designed correctly, budgets can actually dramatically lower stress. I like to consider it a spending plan rather than a budget, because it allows me to know how much money I get to spend each month! As long as I stay within that amount, I’m comfortable and happy. It truly removes so much financial stress, because you know where your boundaries are. Stick within them, and have a blast completely worry-free!

Budgets DO work!

creating a budget that actually works
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If you are someone who swears they cannot stick to a budget, continue reading and try my method. What do you have to lose? I had massive problems sticking to my budget previously, but something about this new way just clicked with me.

If you want to learn more, check out the book Worry-Free Money by Shannon Lee Simmons. I read it a few months after starting budgeting the way I currently do, and she suggests a very similar approach. I also loved the section of the book where she explains how to decide what spending is most important to you, and how to stop impulsively buying things. It’s a book you will not regret reading!

Creating a budget that actually works:

1) First, you will need to figure out how much money you can afford to use each month

If your spending exceeds your earnings, your budget won’t work. If you have variable income, don’t stress! I work casually, so I am in the same situation. I used my income statement from last year to determine this years budget, and shaved 10% off as a buffer.

Monthly spending money available= (Last years net income x 90%)/ 12 months

Try to save up one months worth of money that you will leave in your chequing account (tips on how to do that here). Not living paycheck to paycheck is one of the greatest things you can do to lower financial stress when you have a variable income! So for example, in May I am spending money that I earned in April. The money is already in my account at the start of the month, so I don’t have to worry about running short (if I stick to my budget). Any excess money I earn each month above my budget I leave in my chequing to smooth out the months I know I will earn less.

If you have a salary position with a stable income you’re lucky! Simply add up your paychecks for the month, and you have your monthly spending maximum.

2) Figure out your fixed monthly costs

If you have not read my other post, I would again like to point out that a fixed cost doesn’t mean set in stone! A fixed cost is simply one that does not change month to month. These typically include things like rent/mortgage, internet, phone, netflix, vehicle payments (read how I paid mine off), insurance, etc. In many cases, you can lower these costs simply by making a call and asking! I have dropped my fixed costs by $110 a month,which has been a massive help.

3) If you have debt, figure out how much money you will commit to paying it off monthly

Some writers will suggest you simply “try to put as much as possible” on debt each month. I personally found that did not work for me, especially with a variable income. I found I drifted between two extremes:

  1. Getting so obsessive that I felt guilt spending money on ANYTHING and wanting to put every penny on debt (which would then fail when I didn’t earn as much the next month, and had to dip back into my debt to cover basic bills)
  2. Not having a clear goal of what debt pay off I was aiming for, therefore likely paying down less than I could have with a clear plan.

Instead, I committed to an amount that I wanted to pay down every single month without fail. This allowed me to know the exact date I would be DEBT FREE!!! If you want tips on how to decide on your amount (plus access to a free calculator that I used for determining my debt-free date) read this article.

4) Determine your savings goals

I’d argue that youshould still save money when you have debt. It’s a fantastic habit to build, and also teaches you delayed gratification because you get things when you actually have the money for them.

Savings can mean many things: short-term goal funds, investments for retirement, your emergency fund (I call mine my “Don’t-worry-be-happy account” because it sounds less stressful), etc.

I personally save towards three things:

  1. Retirement: I barely put anything in this, since my main focus currently is paying off debt. I still wanted to start investing though since starting early can have a dramatic effect.
  2. “Fun Fund”: ie the money I get to spend on travel or mountain trips. For a little while I cut out all spending on trips to the mountain (check out my personal instagram account @stephanie_alice_adventures for proof of how much I love hiking and climbing), and strongly resented it. Now I force myself to ONLY use this money for trips so that I know I can have the thing in life that makes me the happiest. Isn’t happiness the point to life?
  3. “Don’t-worry-be-happy account”: Basically a savings account for all the curve balls life throws. This money essentially goes towards vehicle repairs/service, vet costs, and my yearly dietitian fees. My month to month budget couldn’t cover big expenses like these, so I like to tuck a bit away each month so that I can cover whatever comes up.

5) Figure out how much is left!

Everything that is leftover you can spend totally guilt free! This amount will cover all your variable costs: gas, groceries, skincare, pet food, clothes, restaurants, medications, gifts, etc.

I do not divide this amount into categories for each thing. I personally find that it that never works, because each month is so variable for what I’ll need. For example, in a month where I do a large Costco run (Save money on groceries) my grocery spending will be dramatically different than my usual grocery shopping. Read the secret to sticking to your budget for how I manage my variable spending to ensure that I make it to the end of the month before the end of the money.

So, what does MY actual budget look like?

creating a budget that actually works
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So there you have it, my step by step process for creating a budget that actually works. Read the secret to sticking to your budget to learn how to actually follow your new budget!

I showed you mine, want to show me yours? (in the comments below, of course)

A step-by-step process for creating a budget that works, AND I share my actual monthly spending! Take a peak inside my finances.
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For a list of all posts I’ve written, click here

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  1. Nat says:

    great budgeting tips ! so how do you stay on track each month to make sure you don’t go over your budget ? do you manually input everything you spend money on into an excel spreadsheet, or have an app you like, or something like that? I find this part of budgeting to be the most difficult.

    • admin says:

      Thank you so much for commenting! Awesome questions 🙂 The key to sticking to your budget is managing your variable spending. I’m going to write a whole post on how I do that Sunday, so stay tuned. It really is the key to making a budget work. I actually do things old school, and track my variable spending with paper and pen. I divide my monthly variable spending into weeks, so currently I get $235 a week. This has to cover food, gas, and everything else that fluctuates. Each week when I hit that $235 mark, I’m done. I cannot spend another penny until the following week. I prefer to budget weekly because it forces me to stretch the money over the month, and it’s also easier to make myself wait 2-3 days for something once I run out of money than it would be if I had to wait 2 weeks!

  2. M says:

    Thanks for being brave and sharing yours! Here’s ours… two working professionals and two kids. (You’ll know who I am by my email but I’d like to remain relatively anonymous on here…) Our mortgage and paycheques are biweekly so sometimes the months aren’t cut and dry but this is our general monthly budget:

    1885 Mortgage
    900 RRSP
    300 RESP
    700 Daycare
    850 Food
    500 Car Insurance & Gas (2 cars)
    300 Utilities
    250 Home & Life Insurances
    400 Home Repair/Rainy Day Savings
    360 Internet, cable & 3 cellphones
    310 Family Fun & Vacation
    600 “No Questions Asked” (300 each)

    Total: 7315

    The “no questions asked” allowance is a lifesaver in our house. It allows us to spend money on things the other person would find unfair as a family expense, like golf days or Sephora splurges.

    I also do a lot of freelance work and the vast majority of that goes to vacations or, occasionally, an unexpected expense that we don’t want to dip into savings for. Freelance is extra money that isn’t in the core budget.

    • admin says:

      Thank you SO much for leaving the comment. I will definitely leave it anonymous:) Your budget is incredible! You actually gave me some ideas for when/if I ever have a family or spouse. I’m so used to making my own decisions, I was wondering how I would manage the discretionary spending. The “no questions asked” part is exactly like I was thinking. I want some money that I do not have to discuss how I want to spend. I think that would be a life saver. Also, you should be soooo proud that you’re saving in RRSPs and RESPS. That is so impressive M 🙂

      • M says:

        Yes! Actually, the main fight-saver in the “no questions asked” is lunch with coworkers. It can add up so fast and it feels so unfair when your partner spent $200 without you when you were making lunches. Hahaha. Having an adult allowance is my single biggest piece of advice for any couples sharing money!

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