How to Set Up a Simple Budget

What is a simple budget?

A simple budget is a plan for your money. You know how much comes in, how much goes out, and where it goes. No apps or complex systems required — just income, expenses, and allocation. This guide focuses on organizational steps only. It is not financial advice. For investing, debt payoff strategies, or tax planning, consult a financial professional.

Step 1: Know your income

List all money that comes in — wages, freelance, side gigs, interest. Use take-home pay (after taxes and deductions). What actually lands in your account. If income varies, use your lowest recent month or a 3-month average. That’s your baseline. Don’t budget on gross pay — you’ll allocate money you don’t have.

Practical tip: Look at 3 months of bank statements or pay stubs. Add up deposits. Divide by 3. That’s your average monthly income.

Step 2: List fixed expenses

Fixed expenses are the same every month — rent, mortgage, car payment, insurance, subscriptions, loan payments. Pull from bills and statements. Add everything. Don’t forget annual or semi-annual bills — divide by 12 and add a monthly line. Car registration $120/year = $10/month. Set it aside so when the bill comes you have it.

Practical tip: Open your last 3 months of statements. List every recurring charge. That’s your fixed total.

Step 3: Estimate variable expenses

Variable expenses change — groceries, gas, dining, entertainment, clothing, misc. You’re guessing at first. Use last month’s spending if you have it. If not, estimate. Groceries $400, gas $120, dining $150 — whatever feels realistic. You’ll refine after 2-3 months of tracking.

Practical tip: Use our Expense Tracker for 2-4 weeks. Log everything. That data becomes your variable estimates.

Step 4: Allocate every dollar (zero-based)

Income minus fixed minus variable minus savings = $0. Every dollar has a job. If the math doesn’t work — you’re negative — cut variable spending or find areas to trim. If you’re positive, assign the surplus to savings, debt, or goals. No “leftover” money. Unassigned money disappears.

Practical tip: Use a Budget Planner. Fill in income, fixed, variable, savings. Balance to zero.

Step 5: Review monthly

Same day each month. Compare planned vs. actual. Where were you over? Under? Adjust next month’s plan. Your first budget is a guess. After 2-3 months you have real data. Refine. Budgeting is iterative — you get better over time.

Practical tip: Set a calendar reminder. First Sunday of the month, 15 minutes. Review, adjust, done.

Common mistakes to avoid

1. Using gross pay. Budget with take-home. Taxes and deductions aren’t spending money.
2. Forgetting irregular expenses. Annual insurance, car registration, holiday gifts — divide by 12.
3. Unrealistic variable estimates. If you’ve been spending $400 on dining, don’t budget $100. Start realistic.
4. No review. Planning once and never revisiting means you’re flying blind. Monthly review is the habit.
5. Perfectionism. A rough budget you follow beats a perfect one you abandon. Start simple. Improve over time.

Tools that help

Budget Planner — One-page monthly layout. Income, fixed, variable, savings, balance.

Expense Tracker — Log daily spending. Use for 2-4 weeks to get real variable numbers.

Bill Tracker — Due dates and amounts. Keeps fixed expenses visible.

This guide is organizational. It helps you see and plan where money goes. For financial advice on investing, debt strategies, or tax planning, consult a qualified professional.