I'm Karen!

I am a blogger and finance coach. My specialty is helping couples get on the same financial page and win with money and marriage. 


Personal Finance


Financial Planning

How to create a budget in 6 easy steps

A few years ago, my husband and I didn’t budget. 

And because we didn’t have a budget, we didn’t have a handle on our finances.

We were in the overdraft around the 10th of every month, yet we were still enjoying holidays in Europe. 

To say that our personal finances were in a bit of a mess, is a bit of an understatement. 

We didn’t track our spending and we had no clue where our money was going. 

Then, I saw something on YouTube that got me thinking. If we created a budget, starting tracking our expenses, then surely we could start doing a bit more with our money. To start with, we could have any understanding of where it was going, get a handle on our debt and finally get a handle on our personal finances and manage our money more effectively. 

Everyone needs a way of seeing where their money is going. 

Some people prefer to budget using apps, spreadsheets or paper and pencil method.

Whichever one you prefer, a budget can help you see where you’re at in terms of your money, help you get in control of your finances and make it easier to manage your money more effectively. 

You need to figure out a way that works for you. The following steps can help you get started when you are thinking about creating a budget. 

Create a budget and control your finances

Step 1: Calculate your net income

Let’s talk about something super important: your net income! 

This is basically the cash you take home after all those deductions like taxes, insurance, and retirement contributions. Don’t worry if you’re not sure what your net income is compared to your gross salary—it’s a common mix-up! Your net income is what really matters because it’s what you actually take home.

And hey, if you’re a freelancer or self-employed, keeping track of your income can feel like juggling, right? No worries! A trusty spreadsheet can be your best friend, helping you stay on top of those fluctuations in your pay. So, let’s crunch those numbers and make sure your bank account is in tip top shape! 

Step 2:  Track your spending

Before we start this step, let’s have some fun!

How much money do you think you spend each week?

Write it down and then for the next seven days, track every amount of money that you spend, no matter how small. 

After the week is complete, compare your initial idea with the reality. Did you have a good idea or how much you were spending or did you have no clue at all. 

It doesn’t really matter either way, but what a budget will do is really open your eyes to where your money is going. 

Get ready to be in control of your money rather than wondering where it went!

By looking at your outgoings, you need to look at your bank statements and credit card statements, to work out how much you’ve actually been spending. 

Get some highlights and catergorise your spending into groups of essential bills, groceries, fun and transport. 

Add these all up and by taking a close look at these numbers, you can see how much you are really spending! 

While you’re there, you may find some subscriptions and memberships that you no longer need. You can cancel them immediately and start saving some money! 

By both tracking and categorising your outgoings, can help you see if you’re spending more than you earn. You can see what you are spending the most money on and where it might be really easy to cut back or save. 

If you are spending more than you earn, then it’s time to look for things that you can change. Look for things you don’t need or a way to spend less. 

Spending less than you earn is a real money life hack!

If you’d like my FREE monthly budget PDF, then sign up for it today! 

Step 3: Set realistic goals

Setting SMART financial goals were the best thing we’ve ever done and I encourage you to make some too!

Short term money goals normally take 1 – 3 years to complete and these may include: paying down debt or building an emergency fund. 

For more on the importance of emergency funds and why everyone needs one, be sure to read my blog: Emergency Funds and why you need one.  

Mid term financial goals take between 4 to 5 years to accomplish. They can share traits with both short and long term goals. For example, we saved for four years to have a holiday of a life in Florida, USA. It wasn’t easy but it was totally worth it! To return with no money on the credit card was great and a real example of delayed gratification! 

Longer term goals are just that, long term. Long term money goals usually take more than five years to achieve. They include savings for your child’s university fees or for retirement. I encourage you to set regular review dates to help you keep your eye on your long term goals and be sure to break down the larger goal into smaller goals. Take it from me, this will help you stay accountable and stay motivated to reach the larger goal! 

Your goals need to be realistic, if they’re too outrageous, such as learning to fly and buy a plane, you may feel disheartened and give up! 

By creating a money goal, it can help you stay motivated and stick to your budget.

Also, if you’re like me, you get really excited when you see the debt go down or the savings go up! 

For more information on Setting Financial Goals, then be sure to read my blog. 

Step 4: Make a plan

Alright, let’s get real here. We’re talking about what you’re actually spending versus what you hope to spend. Take a peek at your variable and fixed expenses you’ve pulled together to figure out what’s going out in the next few months. Then, line that up against what you’re bringing in and what you’re aiming for financially. It’s smart to set some clear, achievable spending limits for each spending category.

And hey, maybe break it down even further. What’s a must-have and what’s a nice-to-have? Like, petrol for your daily grind is non-negotiable, but a fancy music subscription? That’s more of a treat. Understanding this difference is key when you’re working out how to steer money towards your money goals.

If you’d like my FREE monthly budget PDF, then sign up for it today! 

Step 5: Adjust your spending to stay on budget

Now that you’ve got your income and spending all laid out, it’s time to tweak things if needed, so you’re not overspending and have some cash to put towards your goals. Start by eyeballing your “wants” – these are usually the first to get trimmed. Maybe swap out a cinema trip for a movie night at home? Once you’ve trimmed the fun stuff, take a closer peek at your regular monthly payments. Sometimes what seems like a “need” could actually be something you could do without if you really had to.

If the numbers still don’t add up, it’s time to get into the nitty-gritty of your fixed expenses. Could you score a better deal on your car insurance or home cover by shopping around? Remember though, these decisions often involve some big trade-offs, so weigh your options carefully.

And hey, don’t underestimate the power of small savings – they can really add up over time. You might be surprised at how much extra cash you can stash away by just tweaking things a bit here and there.

Step 6: Review your budget every month

Once your budget is in place, it’s crucial to give it a regular once-over along with your spending to ensure you’re staying on course. Very little in your budget is written in stone: You might come into some money, you may have to buy a new washing machine, or you might smash a goal and be ready to set a new one. Whatever the cause, make it a habit to check in with your budget regularly, using the steps outlined above.

Be warned: you probably won’t feel like you’re winning with your budget for about three months. So don’t get disheartened and give up. Keep going, because if you want to manage your money effectively, then you need to budget!

Moreover, as life evolves, so should your budget. Don’t hesitate to make adjustments as needed. Maybe your income has increased, allowing you to allocate more towards savings or debt repayment. Or perhaps your expenses have risen due to unforeseen circumstances, prompting you to reevaluate your spending priorities. Whatever the case, staying proactive and adaptable is key to maintaining financial stability.

Remember, your budget is a living document, not a rigid set of rules. Embrace the flexibility it offers and make changes as necessary to keep it aligned with your financial goals and aspirations. By regularly reviewing and adjusting your budget, you’ll be better equipped to navigate life’s twists and turns while staying on the path towards financial success.

I know, from personal experience, that creating a budget has really been a positive game changer for our finances. 

If you fancy reading another great blog on budgeting, check out my good friend, Ashima’s blog Budgeting Basics.

Before we budgeted we didn’t have a clue where our money was going, and now we do – which can only be a good thing!

And now, I love helping people to budget and get a handle on their finances too! 

If we can do it, so can you. 

Are you ready to get a handle on your finances? Crush your money goals and finally stop worrying about where your money is going? 

Yes? Then leave a comment below or email me at hello@moneyandmarriage.net to book a free consultation and I’ll show you how. 


PS. My name is Karen and I’m a Finance Coach. I help people get a handle on their finances and WIN with money! 

  1. This is great, Karen! It’s so much harder to get out of debt or save for big goals when you don’t know where your money is currently going. I love your idea about making a game out of tracking expenses by first guessing how much you’re spending. That would definitely make budgeting a little more fun! In the end, a budget is just a spending plan. Take control of your money with intentional spending and life gets easier.

  2. Sam says:

    Such great tips. I am actually in the process of putting together a budget at the moment. Will download your PDF!

    • I love that you found the blog so helpful and that you are starting to budget! Remember that a budget can take a few months to get right, so don’t give up!
      Be sure to reach out if I can help in any way! Karen xx

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