Getting on a budget is a great way to organize your financial picture. We recommend that all of our clients have some sort of budget in place before they start investing. But some that are just starting their careers might need a little guidance on getting on a budget and sticking to it, so I thought I’d break down the process.

Budget Step 1: Track your spending.

The first step can take a little planning, but you need to know how much you are spending each month. You can do this in a number of ways, including saving all your receipts and adding them to an excel spreadsheet. Or you could use a website like, or They all have their own advantages and disadvantages as well as their own ways of tracking, so will have to play around with them a bit and figure out which is the best method for you.

I have used all the methods I mentioned above, but what works best for us is downloading the transactions from our bank website and categorizing them once a week. This is by far not the easiest way to track our expenses, but it’s the one we like best because I have a pretty extensive excel spreadsheet that tracks all of our financial “buckets.”

When you figure out how you want to track your expenses, you need to make sure each transaction needs a category. You can be as detailed as you like, but just get every line item to fit somewhere. You might just have the basics like rent/mortgage, savings, food, utilities or you can get a lot more specific. For example, we don’t just use a food category, we break food down into eating out and groceries.

You will need to do this for at least a month, if not more. The longer you track your expenses, the better idea of what miscellaneous items come up that you need to plan for. You can also use averages to get a better idea of what you spend in each category.

Budget Step 2: Put it on paper.

Once you see what you are spending each month, it’s time to put a plan together. Even if it’s sitting down and scratching some notes on a legal pad. You need to plan on how much you will plan to spend each pay period on each expense category. Try to do this before you get paid so every dollar has a job to do before it hits your bank account.

Use your tracking as a guide for what you might spend. Don’t try to penny-pinch early on. Be honest with what you will spend on each. You don’t want to blow up your budget early on and get discouraged with the whole process.

Budget Step 3: Keep tracking those expenses.

Writing down what you plan on spending each month will be completely wasted if you don’t track how you are doing. At the end of each month, review each category and see how close you came to your budget. It’s ok if you went over. Things come up that might bust your budget. Kids’ birthday parties, surprise car repairs, that fundraiser at your kid’s school can all frustrate you when you don’t plan for them.

As you get more detailed in your budget and the longer you track expenses, you’ll get better at preparing for those unexpected expenses. You might consider a car maintenance category that you budget each month and then rollover to the next month if nothing comes up. Your bank would love to have you open another savings account, and you might consider putting those dollars into that account to use when your car radiator starts leaking. The same goes for gifts, insurance payment (those you might not pay monthly) and other expenses.

Budget Step 4: Tweak your budget.

Once you get the process down, you might want to start making subtle changes to your budget. By subtle, I mean if you are spending $500 a month on eating out, don’t cut it down to $100. You are going to hate this budgeting stuff immediately (and maybe hate me for suggesting you get on a budget).

Try to cut a category by 10% or less each month. Then if you think you can do better, keep cutting. Also, if you plan on eating out less, make sure to adjust your grocery budget (if you break food up like that) to compensate.

Budgeting is not an exact science. Just find something that works for you and try to stick to it. Once you get on and stick to a budget, you can really start attacking those other financial goals like getting out of debt and investing for your future.