Home Money How to Create a Budget That’s Flexible

How to Create a Budget That’s Flexible

by Bethany
How to create a budget

It took me so long to figure out how to create a budget that actually worked for Charles and me. In the end, I took a little bit of everything I learned along the way and created my own budgeting template. 

Today I want to share a little about what I learned, and show you how you can create a budget that works for you — no matter what your financial situation is. 

How to Create a Budget Anyone Can Use

There is no such thing as a ‘best’ universal budgeting system. All of our lives and financial circumstances are unique, and our budgets will be, too. 

However, in order for any budget to work, it must be:

  • Accessible.  Budgeting works best when your expenses are easy to track. Having an accessible budgeting system could mean using an app that automatically logs all of your income and expenses. It could also mean having your notebook or app with you when you spend money so you can log your expenses in real time.
  • Easy to use. If your budgeting system is overly complex, it has more opportunities to fail you. Try to keep things as simple as possible, especially if you are budgeting for the first time.
  • Flexible. What happens if an unexpected expense comes up? Your budget needs to be flexible enough to allow for emergency spending. 

What are the Steps to Create a Budget? 

Underlying nearly all budgeting systems are some standard rules. Here’s how to wade through them to create your own budget from scratch.

1. Identify your essentials 

Your essentials are things you need to survive, like rent, food and utilities. Depending on your work and living situation, essentials might also include things like car payments and insurance. I also like to add your minimum debt payments to the essentials because you don’t want to have your credit tank.

Any expenses that are not optional fall under this category. Only include things you can’t get by without. 

2. Know your Income

The next step is to nail down your income. If you are a W-2 worker who doesn’t get compensated through a commission structure, this should be easy enough to do. Just take your pay stubs from the past month to calculate your take-home pay. 

If you work on commission, freelance or otherwise have a variable income, this step becomes a little more difficult. You can look at your past few years of tax returns, take your reportable income, subtract what you owed in taxes, and divide by twelve. This will give you an average monthly income — as long as you’re saving that tax money religiously. 

However, since it’s an average, some months you’ll earn more and some month’s you’ll earn less. It’s a smart idea to stash any excess income you may come across for those months when you’ll inevitably make less.

3. Pay for Essentials 

Now that you know your income and essential expenses, you can use that income to pay for the essentials. You can automate a lot of your bills, especially if your income is predictable. That way they will be taken out of your account every month without you having to remember any due dates. 

4. Automate your Savings and Investments

After you’ve paid your bills, you can use the rest of your money to save and invest. If you have a retirement plan through work, you can talk to your HR department to set up automatic deductions from your paycheck. That way you won’t have a chance to spend the money on anything other than your retirement savings.

Along the same lines, you can set up automatic transfers to your savings account every month on the day you get paid. That way you can build an emergency fund and/or slush fund before the money disappears into everyday spending.

how to create a budget

5. Spend the Rest 

Have money left over? It’s okay to have a little fun money. Whether your idea of fun is saving up a big travel fund or going out with friends, this is money you can spend without guilt. 

A Budget Should Also Plan for the Future 

Your savings and investments are plans for the future. Generally, you want to first use your savings to cover emergency expenses by building an emergency fund. Once you have enough money for that, you might put any additional savings towards a down payment on a home, a dream vacation, or any other financial goal you may have.

Because of the way the American retirement system is currently structured, most people must electively save and actively plan for their retirement on top of everything else. Most Americans won’t receive a pension, and Social Security isn’t enough to live on comfortably. This is why it’s essential to save for both the short term and long term.

Ideally, you’ll max out all tax-advantaged investment vehicles offered through your employer (401k, 403b etc). In some cases, you may be able to save and invest more via other individual retirement accounts like a Roth IRA or brokerage account.

What Type of Budget System Should I Use? 

The best budgeting system for you is going to be completely personal. Depending on your preferences, here are some budgeting systems that might work for you:

  • Spreadsheet budgeting. Spreadsheets can be as manual or dynamic as you’d like them to be. Some fintech companies offer spreadsheet budgeting that links to your bank account, automatically tracking income and expenses.
  • Budgeting templates. If you don’t want to build your own spreadsheet, but do like the idea of using one to budget, you can find plenty of free templates with pre-filled categories and formatting.
  • Budgeting apps. If you want to bring your budget with you wherever you go, a budgeting app on your phone might be the right choice for you.
  • Planners. Budget planners are typically pen-and-paper notebooks that guide you through the budgeting process. 

how to create a budget

Our Free Simple Budget Template 

It took us a while to figure out a budget that worked for us. In the end, it turned out to be a simple spreadsheet that did the trick. It is now available for you to download as a free budget template.

Apps That Let You Create a Budget 

There are an incredible number of budgeting apps on the market. Here are some of the most popular free options.


Mint is one of the oldest budgeting apps. It allows for complete customization with tables, charts and predictive tools that made it the default choice for the better part of a decade. And while the app is free, you will get some ads on the main dashboard. We use Mint to track our purchases throughout each week and then add them up on our budget template.


Wally is a budgeting app that gives you a lot of flexibility. You can sync your bank account or not. You can upload pictures of receipts as you log your expenses. There’s even the option to tag friends should you so choose. 

Expanded capabilities like foreign currencies and data export can be accessed for a $1.99/month fee. 

Personal Capital 

Personal Capital is the budgeting app for those who want to track their investments and net worth. While it has all the basic budgeting capabilities, Personal Capital specializes in looking at the overall big picture as you work to reach your financial goals. Personal Capital’s budgeting app is free.

Pocket Guard 

Pocket Guard is a sleek, free budgeting app that provides you with all the information you need to know quickly. The Big Picture feature shows you all your accounts at a glance. You can easily see a breakdown of your spending by category or view the amount of your balance that is ‘safe to spend.’

Pocket Guard also shows you offers for different services — especially those which could save you money on monthly, recurring bills.

How to Create a Budget Using an App

Creating a budget using an app is easier than you may think. First, you’ll want to research the app that looks like the best fit for your personal preferences. After you download it and sign up, you’ll either start to log your expenses manually or sync the app with your bank account.

From there, the app should do most of the heavy lifting itself. You may have to use some apps for a few months for all of the predictive and analytic features to work; the more history they have, the better they can customize your experience. 

But if an app just isn’t meshing with you, it’s okay to move on. There’s plenty of competition on the market; shop around to find the best match.

Common Questions for Creating a Budget 

How do I create a personal budget?

To create a personal budget, you will need to predict your income, expenses and savings goals a month ahead. You can use an app, spreadsheet or budget planner.

How do I create a household budget?

A household budget is much like a personal budget, though it is likely to include shared expenses and potentially more than one person’s income. In this case you predict your household income, expenses and savings goals for one month.

How do I create a successful budget? 

A successful budget is flexible and easy to use. It accounts for life’s ups and downs and helps you reach your financial goals. Most importantly, in order for a budget to work, it needs to be created, tracked and revised. It’s not a set it and forget it kind of thing, it’s your own personal financial tool you get to perfect.

How to Create the Best Budget for You

The best budgeting system varies from person to person. What works for you won’t always work for your friends or family members. As long as you’re planning for the basics — income, bills, spending, savings and investments — there’s no shortage of ways to create a personalized budgeting system. 

Far from letting the choices overwhelm you, it should be reassuring that if the first budget you try ends in failure, there are so many ways to pick yourself up and try again.

1 comment

Victor Rodriguez September 8, 2020 - 7:09 am

Very good very helpful thanks Bethany you’re awesome


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