How To Budget Your Money Effectively In 4 (Simple) Steps

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Budgeting your money can seem like a daunting task, but with the right tools and strategy, it can be an effortless process that sets you up for financial success. In this article, we’ll show you how to budget your money effectively. Plus, you’ll get a free simple monthly budget worksheet.

Let me see if I can read your mind!

Every time you think about budgeting your money, you want to bury your head in the sand!

Budget spreadsheets and money apps can be boring! But learning how to take care of your finances is one of the most important steps you can take to secure your future!

But hey, I am here to the rescue!

I could tell you that I was never good with money and found spreadsheets boring too, but the reality is that I love a good spreadsheet template. Especially if it has pretty colors in it.

Yes, because, believe it or not, creating a budget template can be fun! And whether you like going straight into a budget sheet or prefer to work with a budget printable, I’ve got you covered.

But if you want to understand how to use these budget templates, first, you need to understand…

What is a monthly budget?

A monthly budget is a plan to decide how to allocate your income to meet your expenses. By creating a project, you can make sure you are on top of your finances and are able to spend on things you enjoy without having to worry about running out of money or going into debt. This “spending plan” is called a budget.

When you create a budget, you normally create a list of your income, expenses, and savings. And decide an amount to allocate to each section of your spending.

Thanks to budgeting, you will be able to see exactly where your money goes and be able to work towards your financial goals.

My monthly budget template and why it’s different

You might be wondering:

How are you going to help me?

To make your life easier, I created a simple budget template for you!

You just need to enter your details below, confirm your subscription, and you will be able to either download this free monthly budget template as a printable PDF budget or, if you are an Excel wizard, you can save it as a google sheet!

But I have to warn you! I budget a little bit differently than most people!

How? I use the intentional budget method!

This is a way of budgeting I love because instead of overspending and putting away pennies at the end of the month, you move your money into your savings account as soon as you get your paycheck!

Plus, you don’t really worry about allocating a specific amount of money to each area of your expenses.

How do you start a budget?

The basic concept of a budget is simple: spend less than you make, and you are on the right track!

I suppose this is true, but this way of budgeting doesn’t necessarily create much financial security. If you have any financial goals or want to start to build your financial freedom, you need to start thinking about your saving goals first.

There are different budgeting techniques, and each one has a specific approach to how to handle your money:

The traditional budget

When people think about budgeting, they usually think about the traditional budget method:

  • Allocate an amount of money to each category of your expenses.
  • List your income.
  • Add up your expenses to make sure you are on budget.
  • Calculate the difference.

Hopefully, you are left with some money at the end of the month, and you can use this for your savings.

The 50/30/20 budget

The 50/30/20 budget is a simplified budgeting system: you break down your expenses into three categories:

  • needs (housing, food, utilities)
  • wants (restaurants, holidays…)
  • savings

50 percent of your income should go towards needs, 30 percent should be spent on wants, and 20 percent will go into savings.

The difficulty of this type of budgeting is separating the needs from the wants!

For example, vegetables at the grocery store at needs, but an expensive fillet steak or a bag of crisps are wants.

The reverse budget

With the reverse budget system, you set your goals first and decide how much you want to save. It’s what people refer to as to PAY YOURSELF FIRST: set aside a specific amount of savings to put towards your goals every time you receive a paycheck, and then spend the rest.

To create your reverse budget, you must first set your financial goals (saving for a house deposit, building an emergency fund…), then decide how much you need to keep to reach those goals and what portion you can afford to put away each month.

The intentional budget (The system that works for me!)

My favorite approach to budgeting is a mix between the reverse budget and the traditional budget. It’s what I call the INTENTIONAL BUDGET.

What does “intentional” mean?

done on purpose; deliberate.

As much as I love the approach of the reverse budget (set your saving goals and spend the rest), I find it a bit limited because it doesn’t really help you understand where your money goes.

And tracking my personal expenses is one the best thing I ever did to understand what I needed to save to reach financial freedom!

If you want to learn how to budget your money, you need to understand where you are overspending and how you can optimize your habits.

How to budget your money effectively with the Intentional Budget

These are the 4 simple steps I use for my intentional budget system!

  1. Calculate your income
  2. Save first (and set your intentions)
  3. Figure out where your money goes (track your expenses)
  4. Rinse and repeat

By following these simple steps, you will have no trouble even if you are not good with money, and you’ll become a budgeting pro in no time!

1. Calculate your income

The first step to creating a monthly budget is to calculate your income. If you have a job and get s steady paycheck, this step is super easy. Just write down your net income after pension contributions and tax payments.

Be sure to include any other income you might have from side hustles, part-time work, or any investment.

This part might be slightly trickier, f you run your own business and don’t have a steady income.

The way I do it:

  • Look at last year’s income after tax, estimate if your business will grow/stay the same this year, and divide that by 12 to get to an average monthly income.

This is the number you need to add at the top of the budget spreadsheet.

For example:

  • Salary income: $3,000
  • Side Hustle Income (Blog): $500
  • Interests from savings and investments: $0 (still working on this…)

Step 1

Go to the budget template and add your income here:

Screenshot of budget template

2. Save first (and set your intentions)

This is when you determine the amount you need each month to reach your financial goals.

This is the most important step of the intentional budget. You need to think about all your short and long-term goals. Start thinking about what you want to save this year to build your emergency fund, how much you want to put aside each month to save for a house downpayment or for the holiday of your dream, or how much extra money you want to add to your retirement account.

In the goals and intentions worksheet, identify the number of years you will need to achieve that goal and how much you want to save towards each line. The worksheet will then calculate how much you need to keep every year and then monthly to reach your goal.

Screenshot of budget template

And now, a very important point:

Set up a monthly automatic withdrawal to a separate savings account

Once you know what your goal is, the best thing to do to pay yourself first is to move the money from your checking account to a savings account.

Do not skip this point!

If you move your money away, it will be more hustle to spend it during the month!

The best way to set this up is to open an online saving account that pays you a higher interest rate (CIT Bank Savings Builder pays a much higher-than-average interest rate if you deposit at least $100 in it!) and set up an automatic monthly transfer.

Set and forget a deposit, and re-evaluate your financial goals every 3 to 6 months.

Step 2

In the budget template, add the percentage of your income that you want to save. Do not fill in the dollar amount! If you use the template as a google sheet, it will automatically calculate the $ amount. 

Pale yellow cells are calculations, do not enter values there.

Screenshot of budget template

3. Figure out where your money goes

This step is as vital as paying yourself. By figuring out where your money goes each month, you can improve and manage your finances.

Tracking expenses can be quite tedious, and that’s why some more simple budgeting systems just set aside a percentage for expenses without going into the details.

But I really think you’ll benefit incredibly from this step.

I know I did!

As much as Dan and I have always been good savers, I almost had a heart attack the first time I added up how much we were spending by eating out every month! That’s when meal planning and saving money on groceries came to the rescue!

Fill in every line of the monthly budget worksheet in the expenses sections.

Expenses categories

  • Home: Mortgage or rent, property taxes, home insurance, home repairs, utilities.
  • Food: Groceries, restaurants/eating out.
  • Health/Medical: Health insurance, prescriptions, life insurance, fitness, dentist, private doctor appointments.
  • Transportations: Car/loan payments, insurance, gas, car repair/maintenance, public transport, parking etc.
  • Debt Payments: These are the minimum repayments you need to meet every month – in the savings sections, you can add extra payments that will help you reach your goals faster.
  • Family expenses: Education, daycare/babysitting, school supplies, books.
  • Entertainment: Electronics, hobbies, holidays, subscriptions…
  • Personal care: Beauty, clothing.
  • Pet care: Pet food, pet insurance, grooming, veterinary.
  • Others: Gifts, donations, and anything else.

I tried to add as many categories as possible, but you might have some extra expenses that you need to account for.

Always remember to budget for unexpected items too, like repair and maintenance for your home or things you might be doing only once or twice a year, like going on holiday!

The best way to do that is to set aside an amount of money every month under your savings for these big expenses so that when they happen, you are prepared for it!

Step 3

Add your expenses for each line.  The document will calculate for you what % of your income you are spending on each expense. This will help you to figure out if there are areas where you could save more and optimize.

Screenshot of budget template

4. Rinse & Repeat

Now that you have filled in all your expenses, you can see how much is left!

Your goal is to increase the amount of savings you can set aside every month.


Budgeting is a never-ending process. Your goal is to improve every month and understand where your money goes and how you can reduce your spending.

But don’t beat yourself too hard. In the first couple of months, you should just learn to categorize your expenditure correctly and think of ways to reduce one or two expenses at a time. If you try to deprive yourself of all areas too quickly, you will be overwhelmed, and the last thing you need to do is to give up too soon!

Keep at it, and you’ll become a master of your own finances in no time.

By using this system, Dan and I are now saving over 80% of our income every month! This might seem an impossible target for you, especially if you are just starting or feel you can barely survive on your income.

But everyone can improve their finances by learning how to budget!

You can find ways to save money (even on a tight budget), earn a bit more on the side, or even make more at your job by learning how to ask for a raise!

By attacking your finances from all angles, you will become financially free and stop worrying about money all the time.

My favorite monthly budgeting tools

1. Budget Spreadsheets

Do I need to say much here? This is one of my favorite ways of budgeting and tracking expenses. I love that you can customize each template to make it your own and create automated formulas to show your data in many different ways!

2. Budget Printables

I am not a big fan of paper, but I do understand that you might love printing out a beautiful budget. And by filling out your income and expenses manually, you might get a better understanding of where your money exactly goes and how you can reduce your spending.

That’s why you can also print my spreadsheet as a PDF.

3. Keep track of your spending automatically

Some great apps allow you to keep track of your income and your spending automatically.

Some of the most popular ones:

Personal Capital

If you are in the US, Personal Capital can hook up all your accounts in one place and will track your net worth and expenses.

Personal Capital is 100% free and will categorize all your expenses for you using a tagging system. Plus, it will continue to download new monthly data to give you a running history of your spending.

It will really save you a lot of time, as it keeps track of all your incomings and outgoings and will do all the calculations for you.

Personal Capital is perfect if you want to centralize all your finances in one place and plan your future with pension savings and investing. You can get started by clicking here.


A bit like Personal Capital, Mint lets you connect all your bank accounts in one place. It’s free and doesn’t require any subscription. If you are in the US and have a predictable income (i.e., you have a regular job), Mint is a great alternative to a spreadsheet!

It’s easy and simple to use, it looks great, and it’ll help you to find potential savings along the way.

The budgeting features are harder to use if you are a freelancer and don’t have a predictable income.

But for most people, it’s a great automated app!

Wave App

If you are everywhere else in the world, a fantastic free alternative to Personal Capital and Mint is Wave Apps. It was originally created for small businesses, but I love its personal section that helps you keep track of all your income and expenses.

You’ll be able to easily create new categories, and you can also set goals for each expense to understand automatically how over or under budget you are compared to your goals.

This is what I use to keep track of my business expenses!

The reality behind budgeting

I just want to leave you with my final thoughts on budgeting.

I never used a budget or tracked expenses for a long time in my life. It was only when I started to be more mindful and intentional about my spending that I’ve been able to understand exactly where my money was going every month and set realistic savings goals.

Some people will tell you that you need to know where every penny goes. Others will tell you that as long as you set aside 10%-20% of your income in your savings you shouldn’t care about how you spend the rest…

There is truth in all these ways of budgeting: you just need to find the way that works for you.

Here is what I think:

Saving comes first, but if you don’t know where your money goes, you will not manage it as best as you can.

Sure, you’ll set aside enough, but could you do better?

Set your financial goals, and invest a few hours every month to understand how you spend your money. Improve at least one area of your expenses every month or so, and when you feel like you have a handle on your finances, you can chill out a bit more, set aside your savings, and spend less time tracking the pennies.

And if you want to know what I do: I still track the pennies every month!


I love a good spreadsheet!

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  1. Thanks very much good information I must say
    I run a small business but needed much help in this area
    With two workers it’s very hard to keep up and also knowing budgeting is important thanks

  2. Kemuel Jacob says:

    Hii, Thank you so much for this amazing Sheet. Well explained and very motivating too.

    Also, I have a concern with the ‘Emergency Fund Calculator’, once saved as an Excel sheet, the 4 criteria’s check boxes don’t function well. What i mean is that the checkboxes won’t show and instead the terms ‘FALSE’ appear, creating an error at the Total calculation. Could you tell me how do I fix that?

    Overall, an amazing Blog and lovely Sheets.

    Thank you!

    1. Hey Jacob,
      Have you download the actual excel sheet or simply dowloaded the google sheet as an excel? I ask because if you download the Google sheet as an excel file it won’t work. But if you go back to the email, there is also a link to a downloadable excel file (look for “If you are an Excel lover, I made an Excel version that you can download here.”).

      In that version, I fixed the formulas to work for Excel!

      I hope this helps 🙂

    1. Sara @ Gathering Dreams says:

      Thank you, caca!