How to Make a Good Budget

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Budgeting is a highly frowned upon activity for the majority of people. Even leaders in the financial independence community scoff at the thought of them. I personally don’t see a way around keeping a budget as it allows me to watch my finances like a hawk. My income varies each month due to side hustle income and because of having a budget, I can easily adjust my savings rate to how much I’ve earned that month.

Keeping track of your spending is a highly valuable thing to do. When you start paying more attention to your spending, you’ll automatically save more. I think part of the argument against budgeting is that it allows you to account for excess spending. I get that, but if you don’t create a category for excess spending, you don’t allow for it.

My favorite budgeting tool

To start with, the software I use is called EveryDollar. You can use whatever you want but I’ve found EveryDollar to be the absolute best software. I use the free version and manually punch in each expense as we make purchases. The paid version allows you to connect your bank account to the app and it will automatically pull your transaction for you. With the paid version, all you have to do is assign the transactions to a category.

I like manually punching in my expenses because it makes me feel the pain of spending money more. I try to update the budget every night with the new transactions because it only takes a couple of minutes every day.

Unlike Mint or Personal Capital, EveryDollar allows you to create each budget category and then assign each transaction to the appropriate category. You can use the desktop version of the app or use the iTunes or Android apps.

Do your numbers on a monthly bases

EveryDollar is set up on a monthly budgeting schedule. Although it’s set up as monthly, you don’t have to know exactly how much you’re going to make that month to be accurate. If something changes in your income or expenses you can go in and adjust accordingly. The goal of a budget should be to make a mission for every dollar that you bring in for the month.

The first thing you do is put in your monthly income. If your income changes every month, the safest way to set it up will be to look over your past 12 months of income and figure out what your lowest month was. Set that as your base income and if you get paid more, you can adjust for that.

Maybe you’re like me and have a salaried position but also make a side income. I always start my side income at zero for the month and only make the budget using my base salary. Once my side income starts rolling in, I’ll adjust the income and savings categories.

Here’s what my income section looks like at the current moment.


The cool thing about EveryDollar is, there’s a queue for all of your transactions and you get to choose which category the transactions go into. This is very useful for being accurate with my eBay business. Any expenses I have can just go into the eBay income category and I can have an accurate picture of my actual profits.

Here’s a snapshot of some of the transactions in my eBay income category.


Note: I got cashback at Publix for buying stuff from yard sales to resell.

Create your savings category

The next thing you’ll do is set up your savings category. You can create multiple savings categories if you’re saving for different things. I’m currently just throwing all my saving into retirement except for my eBay earnings. I’ve got a separate savings account for eBay and I’m just letting that pile up at the moment.

Here’s what my savings category looks like (and, oh yeah, my tithes category as well).


It may be easier to go through and track all of your monthly bills before you create your savings category, so you know exactly how much will be left over.

Next category: Housing.


Pretty self-explanatory, just put in all your utility bills + the mortgage or rent.

Next category: Transportation.


Woohoo! Looks like our gas consumption for the month has been less than I planned for. If you don’t have any clue what you’re going to spend on a certain category, make a ballpark number and adjust it as you go. Creating budgets is a lot like working out. You get better at it as time goes on.

Next category: Food.


We enjoy our food, so we usually spend a bit more than we probably should. Oh well…

Next category: Lifestyle


Other than food, this is everything we indulge ourselves in every month.

And that’s the entirety of our budget! There’s one last category for debt but we’ve never had to use that. Here’s a snapshot of the percentages each category has in our overall budget.


Another neat feature of EveryDollar is you can change the filter interchangeably with what you’ve planned for, what you’ve spent and what’s remaining. So that’s budgeting. Not too complicated right?

I think the best thing about budgeting is it shows you where you can cut back. Let’s look at a month from over a year ago before my wife and I got really serious about saving money.


You can look back over the years and see how you've done

This is from March 2017. My wife was working at the time and we were bringing in nearly double what we are now. We were also spending way more though. Having the budget allowed me to optimize every category one at a time. Even now that we’ve made a lot of changes, I’m still looking for new ways to save.

I hope this has shown you the power that budgeting can bring to your finances. Over time you can really optimize a lot. Just so you know, I don’t have any kind of business association with EveryDollar and haven’t been paid for promoting their product.

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