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Build it · Lesson 8 of 12

How to Build Your First Budget in One Sitting

Gather your numbers, fill in one page, subtract, and plan savings and a buffer, so you finish with a first budget you can use.

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THE WRITTEN LESSONFollow along at your pace

You already know your take-home pay and where your money goes. Now you put it all on one page. In this lesson you will build your first budget in one sitting, with paper or a simple sheet, and check it with one last question.

Gather what you need

First, gather three things: your take-home pay, your sorted statements, and a list of the bills that do not come every month, like a yearly subscription. Paper or a simple sheet is enough.

Free template

Download the free one-page budget template (PDF) and print it, or copy its rows onto your own sheet.

Four things to gather: a pay slip labelled Take-home pay, two statements with highlighted rows and three jars labelled Sorted statements, a calendar with a yearly bill labelled Bills that don't come monthly, and a notepad titled My sheet with a Free template download arrow.(opens the full-size picture)
Pay, sorted statements, irregular bills, and a sheet to write on.

Fill it in

Then fill it in, line by line. Write your monthly take-home pay at the top. Below it, list your fixed bills, the ones that are the same every month. Then your other spending, taken from your statements. Last, your irregular costs. Add up a year of them and divide by 12, so they become one line a month.

A sheet titled My budget with four blank rows: Take-home pay, Fixed bills, Other spending and Irregular costs / month. Beside it are a pay slip, a bill, a statement and a yearly bill calendar, with the note One line a month.(opens the full-size picture)
Four lines: pay, fixed bills, other spending, irregular costs.

Subtract and plan

Now subtract. What is left is yours to plan. Pay savings first, as if it were a bill on payday, and keep a small buffer for the unexpected. If the number is negative, close the gap: trim a want, cut a variable cost, or look for more income.

A minus sign next to a box labelled Left to plan, a green jar labelled Savings, paid first beside a payday calendar, and a small jar labelled Buffer. On the right, a red -$100 box with three options, Trim a want, Cut a variable cost and More income, and a note Close the gap.(opens the full-size picture)
Savings first, a small buffer, and three ways to close a gap.

An example

Here is an example with made-up numbers. Take-home pay is $3,200. Fixed bills are $1,850. Other spending is $900. Irregular costs are $100 a month. That leaves $350: $250 to savings, and $100 as a buffer.

A budget sheet with Take-home pay $3,200, Fixed bills $1,850, Other spending $900, Irregular costs $100 and a highlighted row Left to plan $350. Beside it, the green text Left $350 above two jars, Savings $250 and Buffer $100.(opens the full-size picture)
Pay minus the three costs leaves $350 to plan.

Timing, not amount

If money runs short before payday, it may be a timing problem, not an amount problem. Put your paydays and bill due dates on one calendar. You may be able to ask for a due date closer to payday.

A month calendar with payday on day 28 and bills on days 3, 5 and 10, with notes A timing problem, Payday: day 28, Bills due: days 3, 5, 10, and Ask for a closer due date.(opens the full-size picture)
Bills early in the month, payday late: a timing problem.

One last question

Before you finish, ask one question: what could make this month different? A birthday, a trip, a school event. In a set of studies, people who first wrote down one reason their week might be different predicted their spending within about 2 percent, instead of about a third too low.

A thought bubble reading What could make this month different? above three icons: a gift marked Birthday, a suitcase marked Trip and a school bag marked School event. A chart shows a green bar, With it, Within 2%, and a shorter red bar, Without it, 1/3 too low.(opens the full-size picture)
One reason written down made forecasts much closer.

YOUR TURN

Read more

Read the full lesson script

Welcome back. In this lesson, you'll put everything together, and build your first budget, in one sitting, on one page.

First, gather what you need: your take-home pay, your sorted statements, and a list of the bills that don't come every month. Paper or a simple sheet is enough, and there's a free template on the lesson page.

Then fill it in, line by line. Write your monthly take-home pay at the top. Below it, list your fixed bills. Then your other spending, from your statements. Then your irregular costs, as one monthly line.

Now subtract. What's left is yours to plan. Pay savings first, as if it were a bill on payday, and keep a small buffer. If the number is negative, close the gap: trim a want, cut a variable cost, or look for more income.

Here's an example. Take-home pay, thirty-two hundred dollars. Fixed bills, eighteen hundred and fifty. Other spending, nine hundred. Irregular costs, one hundred a month. That leaves three hundred and fifty: two hundred and fifty to savings, and one hundred as a buffer.

If money runs short before payday, it may be a timing problem, not an amount problem. Put your paydays and bill due dates on one calendar. You may be able to ask for a due date closer to payday.

Before you finish, ask one question: what could make this month different? A birthday, a trip, a school event. In a set of studies, people who first wrote one reason their week might be different predicted their spending within about two percent, instead of about a third too low.

So remember: start from take-home pay, then fixed bills, other spending, and irregular costs. Pay savings first, like a bill. And ask what could make this month different. Before the next lesson, build your first budget, on paper or with the free template. Next, you'll plan for the bills that don't come every month.