Rather watch the video version?  (and frankly, this week the video is better than the blog)
In Part One of our mini-course “What’s a Budget,” I talked about what a budget is, the categories of a budget, and I had you create an outline of your budget with the categories and line items that make sense for your life. Did you miss Part One?  CLICK HERE to check it out. In this section, which is Part Two of our mini-course, I’m going to talk about the benefits of doing a budget and then we are going to start plugging some numbers into your budget.

Why do we do a budget? 

There are 4 obvious and not so obvious reasons to do a budget.

  1. To know you have a balance between the money that comes in and the money that goes out (no surprises and you don’t’ run out of money)
  2. To make the most of every dollar you earn.
  3. To make sure you are allocating the right amount of money each month and year, so that your goals and dreams happen, whether that’s a new house, to send your kids to college, to get out of debt, or to have a comfortable retirement,
  4. To create some confidence in your life so you can have a more peaceful existence without worrying you may not have enough cash.

Imagine if you had these four things in your life.

We start with an outline – no math required

So, now I know you are just dying to get your budget started right?   Let’s jump in! In Part One of the course, you created your budget outline. We looked at the categories of a budget including

  • Income
  • Daily spending (mandatory and discretionary)
  • Debt
  • Savings
Your homework was to create a list of items you spend money on for each of these categories. Here’s a link if you need to go back and do that part of the mini-course.


Once you have your budget outline, the next step is to start putting some numbers against those line items.

I need you to stick with me here.  I know ‘numbers’ and math can be intimidating.  This process may be confusing or uncomfortable the first time (or couple of times) you do this, but it WILL get easier.  I promise!  It will happen naturally as your confidence grows.

 What numbers are we going to use to build your budget?

In Part One we talked about past budgets and future budgets. Past budgets are about looking at what you spent your money on before today.   Future budgets are about planning where your money is going to come from and how you are going to spend it in the future.

The ultimate goal is to create a future budget  that lays out the path for you to achieve all your goals, and when you look at your past budget, you find your spending and saving is tracking to the future you envisioned for yourself. So clearly, we want to get started by putting together your future budget.

We want to envision what that future looks like.  This is my absolute favorite part of the process.  You get to dream. You get to dream about being debt free, having money in the bank, being able to buy things you want without guilt or fear you can’t pay for them.

Sounds pretty straightforward.  Yes?

So where do we get started? With your past budget. I know, “what?”

Don’t you want to start with creating a future budget? Actually, your past budget is a great place to start thinking about what your future budget is going to look like.

This is where I call on 30 years of experience doing budgets for dozens of companies.  I learned that spending has an eerie way of staying the same year after year.  You get in a groove and get comfortable with the way you spend your money.  I found the same principle applied to my own budgeting and spending.

Think about it. Your house bills are your house bills – they don’t vary much (other than maybe by season for things like utilities and landscaping) For example:

  • Car spending – the loan, the insurance, and the gas. Maintenance may go up and down, but the core costs stay pretty much the same.
  • Groceries – you usually buy the same things month after month….we all have a comfortable way of eating.
  • Housing – your mortgage or rent, your utilities, cable, and insurance; probably don’t change much year over year.
  • Daycare – stays the same week after week, with maybe, a change between winter and summer.

See where I’m going with this?  Once we have nailed down how you currently spend your money, we will be in the right position to create a future budget because you’ll know what you usually spend your money on and you can build your dream life from there. And here is the second really cool thing.  If you feel like your spending is out of control, you are about to put it down on paper and get a reality check on what’s working and what’s not.  And where it’s not?  You can change it!  

Let’s go pull together your current past budget!

This part of the mini-course may be a bit number intensive.  I’m going to give you two different ways you can get your answers. Pick the one that works for you.  You can always come back and change it at any time!  The two options are listed below the next section Cranking Through The Numbers in a section called Your turn – where do the numbers come from?.  In Cranking Through the Numbers, I’m going to show you how the process works with a sample budget.  Once you understand the process, you can do the same process for yourself. This is one part that you may find watching the video is also really helpful.  The link to the video is at the top of the blog.

To make this easier for you, I created a worksheet called the Past and Future Budgets Worksheet.  I’m going to use it through my example in the next section.  We will also continue to use this worksheet in Part Three of the course.

The worksheet is available for you to use as well and its FREE.  It is a pdf where you can fill in the blanks and it will do the math for you.  Make sure to save your changes!  You don’t need the worksheet, but it will make this MUCH easier for you to follow along.  You can download it by CLICKING HERE.

Cranking through the Numbers. We are going to start by laying out your annual budget.  Once you have an annual budget, you can start to break it down into months and weeks, but starting at the annual level, will give you long term perspective where you don’t get distracted by seasonal and onetime events. Remember, read through the example, then I will tell you how to get your own numbers. Let’s jump into the worksheet.

Budget Summary

When we are done with the mini-course, you will have a completed Budget Summary.  For now, you don’t need to do anything with this page.  My examples have completed numbers so you can see how this all works.  We will come back to this page in a minute.


To start this process, I want you to list where your money came from for the last year.  For this example, I’m going to assume I got paid $1,000 each week for 52 weeks.

  • Make sure you include all your line items from your budget outline. If you need to add more as you go, have at it.
  • If you had different amounts for different periods of time, you can use several lines. If your income changes frequently, just put in the amount you earned for the total of the last year.
  • Your pay should be the amount AFTER taxes.
  • If you have 401k, 403b, or other retirement money withheld, add that as a line item. If your company matches your 401k, 403b or retirement money, add that as a line as well.  I want to show the benefit of saving that money later in this exercise.
  • Don’t worry about the future column for now. We will use that in Part Three of the class.

Mandatory Spending

Next, we are going to list all the mandatory spending items from your budget outline.  These are your ‘must haves.’ You can list your total for the year, or do it by month or by week.  I’ve done some of each in my budget so you can see what they look like.  Do whatever works for you to get to your annual number. Two things to note here

  • If you have a mortgage, list it here, not on your debt page.
  • If you have a car loan, do not list here…that will go on the debt page. The thought process is that having a place to live is a ‘must have,’  whereas having a car may not be.

There are two pages to the mandatory and discretionary spending sections, so you have lots of room to list the items that are appropriate in your life.

Discretionary Spending

This is where we are going to list all the ‘like to haves.”

Again, use your budget line item outline.  You may find more items you want to add as you go through this process.

Debt Management

 What are your monthly commitments to paying off debt?  This is the place to list them.


 Savings is the last section.  You want to list any places you are saving money.  This includes that 401k, 403b or retirement plan you contribute to.  It also includes any money you company may be contributing for you (that is yours to keep).

And that’s it for the example! When you finish the Savings page, your past budget is done!

Your turn – where do the numbers come from?

You have two options for coming up with your budget worksheet numbers.  Option One is the Technology Option where you will use technology to crunch the numbers for you.  If you aren’t comfortable using technology, you can use Option Two, the Manual Option.

Once you pick an option, I want you to use the budget line items you set up in Part One.  You will list by those line items (and any more you find you need to add)  how much you spent in the last year for each.   You can do this on a piece of paper, in an excel worksheet, or you can use my Past and Future Budget Worksheet. CLICK HERE if you need a free copy.

Let’s jump into your two options.

Option 1 – Technology Option

I recommend that you use www.mint.com, which is a FREE app from the makers of Quickbooks and Turbotax.   Mint.com integrates directly into your bank and credit card accounts so all you have to do is log in and make sure that everything that comes in and goes out is in the right place.  It’s EASY!

Just an FYI – What we are calling ‘line items’ in our budget process, Mint.com calls ‘categories.’

To sign up, go to www.mint.com

Here’s a video on setting up your account and linking your bank accounts in under three minutes (REALLY!)  http://bit.ly/2NuNGcN

And here is a link to a great tutorial on how to use Mint.com.  It’s about 15 minutes long but shows you everything you need to get started.  http://bit.ly/2MW7EIi

Here are the steps to follow:

Set up your account

  • Link your cash and credit card accounts.
  • Do not do investments, net worth, goals or budgets. You can play with those at a later date, but right now they are shiny objects that will distract you.
  • Go through and code several months of transactions. If you can do a full year, you will get the most accurate picture.   If your life is pretty predictable, you can probably do a few months worth and come up with estimates that make sense. If you go this route, just make sure you account for any expenses you get once a year (like Xmas spending or house insurance).
  • Do both your cash and credit card accounts so all your spending gets included.
Once everything is in, you can get a report that gives you the numbers you need for your budget. Here are the steps:

  1. Go to the ‘Trends’ tab
  2. On the left pick ‘Spending’, then pick ‘by Category’
  3. Go to the date drop down and pick the dates you want to include. You can pick something like year, or month or week, or you can put in a range of dates like October 1, 2017 – September 30, 2018
  4. Go down to the bottom and there are all your categories and how much you spent.
  5. Do the same thing for the Income report on the left, under spending.
Now is that cool or what?  The technology option may have a bit more learning curve, but once you set it up, you can put it on your phone and update it while you are sitting in the dentist’s office.  It really is easy and as you get better with your budgeting skills, you can check in on your progress anytime you want.

Option 2 – Manual Option

The manual option gets you the same answers, it just may be more time consuming.  You will need to go through your paychecks, bank statements and your credit card statements and with your handy calculator or excel worksheet, do the math.

You may want to get some highlighters and do some color coding to make the process easier. You will need to go through all your statements an get totals for each of your budget line items.

If you choose this option, I would do one month at a time and then add them up once you have each month done.  Same as Option 1, if you can do a full 12 months, you will get the best answer, but you may be able to do several months and make some assumptions.  If you go this route, just make sure you account for any expenses you get once a year (like Xmas spending and house insurance).

Stuck?  Try the video version

There are lots of steps in this part of the course so you might want to go watch the video version of the part of the course as well.  Everybody learns differently, and sometimes it helps to hear the instruction as well as see it.

So what does this all mean?

We are going to dig into some analysis of your budget and set up a future budget in Part Three, so believe it or not, you are done with this week’s work.

One thing you can take a look at is back on the Summary Page.  (I told you we’d come back to it and here we are!) The only three things I want you to look at, and think about, this week are the

  • Income
  • Total Spending
  • Money left over or (over spent)

How  do you feel about these numbers?  Are they what you expected?

The majority of people are surprised by these three numbers.  We sort of think we know, but until we put these numbers on a piece of paper, we don’t really know.

The biggest surprise I think people see, is when their Total Spending is in the red.  Red means you are spending more than is coming in.  The reason?  Credit and credit cards.  They allow us to cover overages in the short term, but in the long term, they can make it really hard to have a balanced budget.  We will talk about that more next week in Part Three.

What’s in Part Three?

In Part Three we are going to talk about three things

  • How you should think about balancing Income with Day to Day Mandatory spending, Debt & Savings, and Day to Day Discretionary spending.
  • How to create a Future Budget for yourself.
  • Things you can do next to make your next Past Budget look like the Future Budget you just created.

Whew…. I bet you are exhausted.  Learning how to budget is not an easy process.   I promise though, over time, it will get easier.  You will repeat this exercise on a regular basis and every time you do, you will get more confident you are taking control of your money.

Just remember, as we say in my house, “baby steps can get your further than you thought, faster than you thought.”  Have you ever seen how fast a toddler can move?  Their legs are short. Their strides are long. Yet they can get across a room in the blink of an eye.  That’s what I mean.  You just have to keep taking those baby steps.

If you want to be notified when the third and final part of this mini-class is available, you can sign up by CLICKING HERE, and I’ll shoot you an email.

If you get stuck on this part of the course, come join us in the private Facebook Group and we will help you out.  You can find the group by CLICKING HERE.