Budgeting 101: How To Plan A Budget To Make More From Less In 5 Easy Steps

By Chantal Michaud, - In Money

Budgeting 101 - Two men arm wrestling in a bar with a few dollars on the table.

Photo Credit: gratisography

I have always gone through life with the notion that budgets are for people who can’t manage their money. The purpose of budgets eluded me. I was not an impulse buyer, I had a sound saving account and didn’t feel like I was missing out on anything.

Wikipedia defines a budget as:

A budget is a quantitative expression of a plan for a defined period of time. It may include planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities and cash flows. It expresses strategic plans of business units, organizations, activities or events in measurable terms.

Working without a Budget worked for me… then I decided to try it out.

As Kristina Plimer of Wealth Tutor says:

Working without a budget may be fine and dandy, but it’s a bit like going for a drive without a destination in mind. You won’t know where you’ll end up until you get there…A budget is your sat nav to wealth, abundance and fun!

And I have to agree with her. Budgeting has helped me grow my savings while making me more aware of my spending.

Though it’s not an easy task, I believe everyone can benefit from putting together a simple budgeting plan. Here are a few tips to help you along the process.

Budgeting 101:

1. Every Dollar Must Have a Purpose

picture of dollar bills to show Budgeting 101: Make Every Dollar Count

Dollar Bills

This is the foundation of your budget. You must assign a purpose to every penny you have. For example, say you have 600$ this week, you will want to create categories and assign every dollar to a category. Maybe assign 150$ to cover the cost of food. If you love to eat out, assign 30$ to eating out. You have 420$ left. 40$ for your gas, 70$ for utilities and 100$ for car payment will leave you with 210$ for your mortgage.

Now that you have assigned each dollar to a category, when you go to the grocery store and wonder if you have enough for the nice beef cut, instead of checking your balance and see 600$, you will now see it as 150$ to cover your groceries for the week.

2. Save, Save, Save

Budgeting 101: Picture of shiny coins stacked up on a dark desk


We all have large but less frequent expenses in our lives whether it’s a vacation, Christmas gifts or insurance payments. Forget to plan for them and you could get into trouble. So instead of charging these expenses to your credit card when they come in, break them into monthly, more manageable amounts.

Everyone needs a vacation once in a while. You decided you’ve deserved yours and have planned a 1000$ vacation in 6 months. Not preparing for this expense could do nothing more that bring on more stress and ruin the time you’ve put aside to relax or even make you decide to cancel the vacation — you can’t afford it.

Instead, look ahead six months. You know you’ll be spending 1000$ more than you usually do. So instead of dishing out your 1000$ when the time comes, break it down into monthly  “payments”. At 167$ per month or 42$ per week, it’s much more manageable and will save you a lot of troubles. You’ll be able to buy your tickets to paradise without a care in the world.

3. Don’t Sweat The Small Stuff

Budgeting 101 Don't sweat the small stuff. Picture of a women mediating


It’s Thanksgiving, and you’re making your famous supper. With all of the extra mouths to feed, you went over budget on food *gasp*!! Don’t sweat it! It has happened to the best of us, and it will happen again and again.

There are no budget police. You are the boss of your spendings. If you’ve overspent in one category, look at your whole budget and see what you can move around. Maybe reduce your clothing budget for this week to compensate (you know you have enough cute tops anyway). Or since you’re preparing a feast, you can reduce the amount in the eating-out category (you’ll probably have leftovers to last you a week anyway 😉 ).

If you can’t reduce from this month’s budget, you can always borrow from next month.

4. Be a Month in Advance

Picture of a calandar as part of budgeting 101 is about planning a month in advance.


Instead of living paycheck to paycheck, what I’ve finally started doing is living on last month’s paycheck. To do this, you must save up enough to live one month on your savings. After that, you are golden.

It may sound useless, but it has helped alleviate a lot of stress.

Instead of having my bills pile up while waiting for my next paycheck, I can pay them as they come in using last month’s money. This saves me from a lot of planning, and potential late fees.

5. Plan for the Unexpected

Picture of a road sign that says expect the unexpected that is a critical thought when it comes to budgeting 101.

Expect The Unexpected

In my opinion, this is the holy grail of budget planning. If there’s one thing everyone should do is plan for the unexpected.

I have two dogs, a hockey-playing boyfriend, a baby on the way and appliances that break time and time again. Unexpected spendings are unavoidable. Whether it’s a sick dog, a hockey injury, or another appliance needing fixing, you can bet that most months require us to cough up a bit more cash than we planned for.

Which is why our budget consists of an “anti-panic” category. We assign a portion of our money for the unexpected and if it’s not used…great! It falls in our savings account. If something does happen, I eliminated all reason for stress by planning ahead.

Planning a budget is easier said than done. When starting out, it requires a lot of work and preparation. However, in my experience, creating a budget has helped me a lot.

So try it out! Take a bit of time and plan that budget! What have you got to lose?


Entrepreneur, writer and web developer.