Making a Budget That Works in 5 Simple Steps

Three years ago, before my husband and I got real about our finances, I really didn’t have the slightest idea how to keep a budget.

Oh, I knew how to make an Excel chart, with categories in one column and amounts in another. I even knew enough to make sure that the amount in the categories equaled the amount of income we were bringing in.

But that’s where my knowledge stopped. My problem? All those numbers were just theoretical. $500 for food? Yeah, sounds about right. $100 for clothing? Sure. And so it went, on down the line.

No matter how many times I’d play with the numbers, they weren’t based in reality. I simply didn’t get — like deep down in my pockets — that the numbers were ALL I COULD SPEND.

I know, I know. That’s so obvious, right? But I’m being honest here, folks.

Okay, so here’s how we finally started making a budget that was based in reality and actually worked for us.

1. We spent two months tracking everything we spent. We stuck a little notebook in our pockets and wrote down every single thing we bought.

2. After two months of tracking, I divided the things we were spending money on into some basic categories — I started out with fewer and then fine-tuned it as the months went on. Fixed categories were easy, but most of my categories were variable. I estimated those as high as I could. I also added in annual expenses, which we hadn’t encountered in the previous two months, such as insurance and car registration.

3. I totaled up all the categories in Step 2 and freaked out. It was about $1,000 a month more than we were making. Not good. Together with my husband, we started slashing items. Cable: Gone. Bottled water: Gone. Eating out: Gone. Item by item, we slashed and slashed and slashed some more until we balanced the budget.

4. We continued tracking all variable expenses and I synced them up with the categories every week. I gave my husband a progress report and we made on-the-fly adjustments to our categories if need be. We had a lot of these adjustments to make in the first several months.

5. I continue to adjust our budget every month based on upcoming events: Bar/Bat Mitzvah (bump up gift-giving category), Pesach (bump up the food budget), etc. Then I share the budget with my husband and he adds his suggestions. I further adjust, show it to him again, we both agree, and then we’re stuck committed to our budget for the next 30 days.

We’ve been doing this for almost three years now and I can now honestly say that we’re pretty good at this budget thing. Of all the changes that came about from doing the Dave Ramsey thing, the ability to make — and stick to — a budget has been the biggest blessing for us.

Are you budget challenged like we were? Or do you have a system that really works for you?


  1. Oy..budget challenged isn’t the word. I am so impressed by your story, now if I could find a system my husband and I can BOTH live with and stick to. The writing down every expenditure thing seems so simple, but I know what will happen—pen is lost, notebook in the car, notebook totally lost, on cell phone when making purchase so mean to mark it down later, etc. etc. We pretty much fly by the seat of our pants, live fairly frugally and hope for the best.

    • We had the pen/notebook/cell phone thing going on, too. Somehow, though, when we finally read the DR book and decided that THIS IS IT, we managed to make it work for 2 whole months.

      Another way to do it — that doesn’t require any notebooks OR pens — is to use a strict envelope system for all variable expenses. When the money is gone, it’s gone. My husband has issues with cash, so we can’t seem to make this work for us, but I know so many people who LOVE the envelope system. And really, it forces you to be totally intentional. As I’m writing this, I am feeling motivated to broach the envelope system with my husband again. (He’ll be delighted… not.)

  2. In order for my husband and I to get on the same page, we had to attend the class together. I’ve read/applied different finance books for years, but it wasn’t until we went together that we started working things out.

    No major problems, but it’s a lot different now that we have the same goals. Realistic goals.

    I don’t write down everything we spend either – when the money is gone from the envelope it’s gone – no tracking needed.

    Mara – I love the envelope system, but my sister does not. They use envelopes, but they put monoply money in there. Helps them actually see what money they have left without having to worry about cash.

  3. Eli Mandel says

    I used the envelope system for two years and it got me out of $7,000 of credit card debt; while I was in school full time and working part time (we made about $30,000/year).
    Since then we have struggled to keep our envelope system working, my paycheck is directly deposited and even though I have to go to the bank to deposit my wife’s I still find it hard to withdraw the money that we had allocated to each variable category that we are supposed to spend only in cash.
    What happens is: it’s the second of the month – a Wednesday – and we are supposed to have $325 in the grocery envelope for the next two weeks, but on Sunday – the 29th of the previous month – we already spent $73.36 on groceries, I haven’t recorded Sundays purchase yet and calculated how much we have left in that category for although it was spent in the previous month we told ourselves that it’s going to come out of this months grocery category because we overspent on the groceries last month. Now I’m at the bank depositing the paycheck and I don’t know how much to withdraw for the grocery envelope and I’m feeling pinched because I know that we overspent last month and we’re starting off this month on the wrong foot so I don’t want to take out too much and yet I know that if I take out too little we won’t make it for two weeks.
    So I don’t take anything out because I’m a little too indecisive.
    For the rest of the two week period we spend on the debit card, we overspend again and I’m frustrated!

    Does this feeling resonate with anyone?

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