Budgeting in 6 Easy Steps


A lot of people make budgeting sound complicated but in fact, it is really, really simple. Where it might get a little tough is in actually sitting down and doing it for the first time but if you do it for three months in-a-row, your future self will thank you for it. Think of it as a big investment in the future you!

This article will help you to get familiar with what a budget is and how you can become successful at completing one.

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Before you begin your budget, first, you need to download one of the two budgeting spreadsheets designed for adults and young adults. The difference between the two is the level of detail you will be asked for. You decide which one is best for you at this time.

Once you have decided which Budget Spreadsheet you wish to use, move onto Step 1.

Step 1: Calculate your monthly income

Knowing your monthly income is critical to how successful your budget will be.

List all of your income in the spaces provided. If you are working a part-time job, list you take home pay as this is what determines how much you have to spend. If you receive gifts, list those too and remember, a handy trick is if you receive say €200 as gifts throughout the year, divide the number by 12 and list write in an amount for each month (in the case of €200 gifts, this works out at €16.67 per month).

You will need this number at the end of your budgeting exercise.

Here’s an example.

At the top of your budget spreadsheet, line by line:

  1. Income
  • Income from part-time (or full-time job): €1,000
  • Gifts: €16.67
  • Odd jobs income: €50

In this case, the total income is €1,066.67 per month

That’s it for step 1!

On to Step 2

Step 2: Identify and add up your fixed monthly expenses

Next, you need to list out all your monthly expenses.

To do this, start by listing your fixed expenses (also known as non-discretionary expenses). Your non-discretionary or fixed expenses are expenses that you must pay. If you have any debts, include those debts in the non-discretionary expenses, too. Examples include your rent/mortgage, gas, water bill, groceries, car payment, and student loans (think of monthly bills and living expenses that are absolutely due during the month).

If you don’t have any such expenses at this time, then bypass those and move on.

A handy trick to identify expenses is to gather all of your bank account statements for the last 3 months along with your debit (or credit card) records. If you pay costs through direct debits and contactless payments, these will give you a lot of valuable detail. But you should also ask for receipts each time you spend money (even where you make a contactless payment) as actual receipts can provide a wealth of valuable spending details, such as where exactly you spent your money and what you purchased.

  1. Sample Fixed Expenses
  • Rent: €300 (Note: rents can be much higher depending on where you live and depends on whether you share with a roommate)
  • Electric Bill: €25
  • Gas Bill: €20
  • Food: $350
  • Student loan payment: €100

Tip: Detail is really important when you first start to budget as the detail of how you spend can help you make more informed decisions later if you have plans to save money and need to know where to make some spending cuts.

Step 3: Set your goals

Now that you have spent a little time listing your income and tracking down and listing your fixed expenses, it is important to take a step back from the budgeting process and consider why you are doing it. The main reason most people use budgets is to help them achieve a goal. That goal might be to raise a family, to save for a holiday, to buy a new car. The list can go one and it really depends on the individual.

Have you thought about your goals?

Read more How to Set Goals

Write down what your money goals are. Think about what you want to achieve in a year, or 3 years time. The reason this is important is because goals will give you focus and help keep you motivated.

To begin, write down your financial goals (Read more: How to develop and set personal goals). If you have not thought about or listed goals before, there are some simple tricks to can use to get you started. For example, do you want to have a job, own a car, travel the world? Think about what you want to have when it comes to money. Do you want to have enough to be truly independent? List out what you want to achieve in a year, in 3 years or even in 5 years time.

Examples of financial goals:
– Save for a world trip
– Save enough for financial emergencies
– Buy a car with cash
– Save for a deposit on a home of your own

As you set out your money and life goals, a trick is to think of them as additional expenses because that is precisely what they are, but they are future expenses which you need to start putting money aside for now.

Add this into your budging worksheet, it would look like this…

  1. Expenses
  • Rent: €300 (Note: rents can be much higher depending on where you live and depends on whether you share with a roommate)
  • Electric Bill: €25
  • Gas Bill: €20
  • Food: $350
  • Student loan payment: €100
  • Emergency fund €50
  • Car savings €100
  • Big trip €150

Remember, plans can and will change so it’s good to build that into your budgeting process and it may also require you move some money from one expense to another, for example from your car savings to your big trip if the big trip is coming up in a year but you don’t expect to need the car for a few years.

Step 4: Determine your ‘discretionary’ expenses

Your discretionary expenses are those expenses that are not fixed, as outlined above. Another way of thinking about discretionary expenses are those that not essential. Examples include going out, going to movies, concerts, coffee, snacks and so on. Notice that they come after your fixed expenses and financial goals because it is important that when money gets tight, as it is sure to do from time to time, discretionary expenses are seen as less important than fixed ones…and less important than your financial goals.

. It’s important to prioritize your financial health over unnecessary things, such as entertainment and vacations.

Building off the example above, your expenses would now look like this…

  1. Expenses
  • Rent: €300 (Note: rents can be much higher depending on where you live and depends on whether you share with a roommate)
  • Electric Bill: €25
  • Gas Bill: €20
  • Food: $350
  • Student loan payment: €100
  • Emergency fund €50
  • Car savings €100
  • Big trip €150
  • Cinema €50
  • Hair €30
  • Nails €40

You get the idea. The discretionary expenses are really up to how you spend and only you know wt those are. A trick is to get receipts for each time you spend for at least 3 months as this will provide you with excellent detail of where you spend but also, what you spend your money on.

Step 5: Doing the sums – subtract your income from expenses

Now, subtract your expenses from your income. There are 3 scenarios on how your numbers will stack up:

You get a positive number, this means you make more money than you spend (excellent!).

You break even, this means you have exactly enough money, but no margin (whew!).

Negative number, this means you’re spending more money than you take home (Oh no!).

What actions to take – each outcome is what it is, for now! But you’ll need to take action so here are some steps to consider:

Surplus – If you are saving more than you spend, you are in a good position but you probably want to do better. If you plan to keep your income the same, you may want to think about saving a little more per month and getting to you to your financial goal a lot sooner.

Break-even. You are still in a good place but if you wish to do better, you may wish to look over those discretionary expenses to see if there any costs you can cut back on. Remember, this is why the spending detail is so important as you will know precisely what you are spending your money on. If you find that you are spending too much on say, movie tickets, or eating out, look for ways of cutting those costs, perhaps go to movies when ticket prices are lower, or finding a new place to eat out.

Loss – this will not work, if you are facing a loss each month, you need to change a few things. Your options are to either find more ways of earning additional income or cutting costs significantly.

Now that you have done all of the important work, you can take a bow. All that remains is to monitor and where necessary, make the required adjustments.

Step 6: Implement, monitor, and adjust your budget

Finally, now that you have all of the financial details accounted for, you now need to put your plan in place, monitor it and adjust it from time to time when needed. Remember, you may have an expense or lose some income than can mean you have less income or more expense that will impact how much surplus or loss you have from month-to-month. So it is important to take the necessary steps to keep your plans on track.

Oh, and one other point, stick to the plan and don’t panic when things go wrong. As long as you have a plan and the overall means of getting there, you’ll do fine and if things go off track, adjust your plan and get moving again!


The first three months of budgeting will be tough but they are also critical as they help you build real awareness of how you spend. This detailed information will be critical to ensuring you have the best chance of reaching your financial goals.

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