Easy 10 Step Guide to Budgeting

My husband and I paid off $300,000 of debt by doing a monthly budget and sticking to it. Now I help other couples meet their financial goals by guiding them through writing a budget and following it. Are you ready to change your familys’ future?

Want to know why your current budget doesn’t work? Stay till the end to find out.

How To Budget: Step By Step

Step 1: Download your FREE budget form

Now you can follow along with the rest of this blog post as I go through the step by step process of writing up a budget.

“Don’t worry about getting your budget correct right away. On average, it take about 3 months for a change in budget habits to kick in. Just keep trying, you got this!”

Step 2: Add Up Your Income

The first part of your budget is your income. Add up yours and your spouses income as well as any other income you expect to receive this month.

If your income is irregular or you receive several paychecks a month, find out what the average total you received in one month is. Then, you write out the budget to that amount. Any extra income you receive over the amount you budgeted goes to your snowball payment. (more on that later.)

Put the total income at the bottom of that section and move onto the next.

Tip: Write your budget in order of priority. That way if you find yourself with a tight month you will know what needs to be covered and what can to be cut.

Step 3: Tithe 10% of our income

“A tenth of the produce of the land, whether grain or fruit, is the Lord’s, and is holy.”

Leviticus 27:30

Now, you might not have a church that you can donate to but that is okay. I think we can all agree that our lives, our morals and the world around us, would benefit greatly if we were all just a little bit more generous. Whether you have a church to give to, know a family in need or even just want to make the world around you a better place, I recommend that you put at least 10% of your income aside as a tithe.

It teaches us that our money is not ours.

I believe that when we change the way we see money, we also change the way we use it. When my husband and I started working to become better “Stewards” of our financial situation, we were able to get out of debt WHILE also becoming more generous. We no longer asked ‘what about me’. We started asking ‘what can I do to help.’

STEP 4: First Priority/Four Walls

Before we talk about paying off debt or contributing to our investments we want to make sure our household is covered. That is why our 1st priority is the Four Walls.

  1. Food*
  2. Utilities
  3. Shelter
  4. Transportation*


Food should be your first priority. You want to make sure your family has food in their bellies. Restaurants should not be a top priority, especially if you are in debt. Entertainment will be budgeted later on.


This cover all of your electricity, gas, water, trash and phone bills. That way no matter what happens later on in your budget, your family will have warm beds and running water.


This covers your Mortgage Payment/Rent. Make sure your family has a roof over their heads and a place for you to come home to at the end of the day.


Cover your cars expenses in this category. This will include car loan payment, fuel and any other monthly expenses to make sure the car gets you from A to B.

Step 5: Second Priority/Lifestyle

This covers the following items:

  1. Cable/Internet/Phone
  2. Clothing*
  3. Entertainment*
  4. His/Her Personal Funds*
  5. Childcare*

The reason why these items are second priority is that in order for us gain control of our finances, we have to know what is more important. What kind of family would we be if we can’t keep the lights on in our house but always find money for our Friday nights? Now, that being said, these items are still a priority.

When my husband and I were paying off debt, we always made sure we had $50 in our entertainment envelope* for a night out once a month. It is important to make ‘getting loose’ a priority. We found that when we did so, we were less likely to break the budget for an impulse ‘I’m so stressed out I don’t care’ kinda night.

That being said, there were months that we didn’t budget for entertainment because we knew it was going to be a tight month or we had a financial goal we were saving towards (i.e. a vacation or a trip of some kind). Who wouldn’t put off going to McDonald’s for a few months if that means going on a weekend getaway?

“My Dreams are more important than my Wants.”

So always make room for entertainment in the budget but remember what is important.

“Anyone who does not provide for their relatives, and especially for their own household, has denied the faith and is worse than an unbeliever.”

Timothy 5:8

Step 6: Sinking Funds

What are sinking funds?

Sinking funds* help you save for any large expense that you know is coming up in the future such as Christmas, your daughters birthday or new tires for the car. These are all events that unless we plan for them, can set us back in our budget or even cause us to use that credit card and get back into debt.

We know when Christmas is going to be since, hello, it happens on the same day every year.

Here’s a practice run: We know that Christmas is in December and, as I am writing this, it is currently August. Let’s say you want to spend $1,000 on Christmas. That leaves you about four months to save. By utilizing your budget correctly, we would only have to save $250 a month in preparation for that big holiday.

Doesn’t that sound better than shelling out $1000 in one go? I think it does.

Use this same technique for anything, even if you don’t now the exact date you will need it. If you know approximately how much you need to save, you can save little by little every month in preparation. For example, tires. You’ve noticed that the tires are getting a little bald on your car and will have to replace them soon. Find an estimate for the cost of the tires and spread it out over, say, four months. That gives you time to save for them and you won’t have to swipe the credit card or pull cash out of your emergency fund to pay for them.

“If we prepare for emergencies, they won’t become emergencies.”

Reality Check: How important are your financial goals? How badly do you want to get out of debt? Sometimes that means the kids might not get Christmas presents, big birthday parties or Disneyland for a few years. But making your financial goals more important than materialistic items is going to make you a better parent in the end.

Kids would rather have a happy and stress-free parent rather than one stressed out from the weight of debt.

Step 7: Insurance

The next category is insurances. This is pretty self explanatory but these are the basic insurances we recommend for everyone.

  1. Homeowners Insurance/Renters Insurance
  2. Car Insurance
  3. Health Insurance
  4. Term Life Insurance
  5. Disability Insurance

Step 8: Minimum Monthly Payment

Now that all of our basic expenses are taken care of, we can cover our minimum payments. This category includes any other loans that we might have that were not covered in the above categories such as student, credit and personal loans. We want to make sure that we don’t have creditors calling us for money that we don’t have. If we can at least make sure the minimum monthly payments are covered, we can then focus the rest of our income onto the next category

Step 9: Debt Snowball

FINALLY! We have reached the ‘Paying Off Debt’ section of our income. If after your income takes care of your household needs, insurances and any large future foreseen expenses are planned for, and you have extra income, it is called Disposable Income. This income is then applied to our Debt Snowball

What is the Debt Snowball?

The debt snowball is a list of all of your debts from smallest to largest. We then take whatever disposable income we have left after writing the budget, and apply it to the smallest debt, month after month, until it is gone. We then move onto the next debt and the next until we become DEBT FREE.

Why do we start with the smallest debt?

When we pay off the smallest debt, a few things happen.

  1. We scratch off one of the debts off of our Debt report below.
  2. When we get that first little debt pay off victory, we get a little sense of ‘Okay, this isn’t so bad. We can do this!

Tip: Not sure if you did your budget right? FOLLOW THE BUDGET FORMULA:

Total Income – Total Expenses = Disposable Income

(Apply Disposable Income to Debt Snowball)

Income – Total Expenses – Debt Snowball Payment = 0

Step 10: Repeat

Remember that you might not get your budget right the first try, and that is okay. It took my husband and I three months before we finally got our first budget right. We have been making a monthly budget for over four years now and we STILL make mistakes every once and a while. We forgive each other for the mistakes we make then commit to a better budget the next month. It is not about the times that you fall, it is about the times you fall and get back up or more eloquently put…

“Knock me down nine times but I get up ten.”

Cardi B

Mistakes will be made and that is why there is a second column on the budget called SPENT. Some months more will be spent on your budget than expected. The second column allows you to keep track of how much you actually spend and will help you when it comes time to write up your budget for next month.

The first budget we set up, we thought for sure we would only spend $350 on food that month, but 2 weeks later we found ourselves with no food and no money in the food budget. We had to change our spending habits and our budget. It has swayed here and there over the years, and honestly, the amount you put into the category doesn’t matter at all if you won’t stick to it.

Keeping track of that second column will also tell you where you need to tighten your budget.

*If you have tried budgeting in the past and it has never worked out, that is probably because you did not use an envelope system. Anything with a star by it is what I suggest are used in a cash envelope. That means that these expenses are carefully budgeted for the month, then that amount is pulled out in cash and placed in an envelope.

Whenever we buy something at the grocery store, we pull out the cash we need, and once the envelope is empty, we have no more cash to spend for the month. This strategy helps us keep track of our budget AND slowly curbs our needless spending habits. Using cash envelopes, leaving the debit cards at home and cutting up the credit cards will ensure that no one goes over the budget.

Remember, that the items in these categories are just suggestions and can be moved around, within reason. Your budget will only work for you if you work with it.

If you need the budget personalized to your families needs, click the link down below and schedule your FREE budget session! I will be happy to help you set up a budget to help your family get out of debt and find financial peace!

So what do you think. Are you ready for Financial Freedom?

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Yaas, queen! Welcome to the fam!