How to Start a Budget (Part II)

How to Start a Budget

For this post we’re getting back to basics. Today’s topic is one that many of you may already understand. While Johnny and I are fortunate enough to be out of debt, we realize debt is a reality for many. And so we’d like to share one of the tools that helped us slay the Debt Monster.

Today’s Back to Basics post is the second part of our How Budgeting Works post. Here’s a short refresher:

  • Budgets are a necessary evil. Deal with it. Just kidding (about the harsh words, not about the budgeting). And itemized budgets are the best way to have control over your saving-to-spending ratio.
  • Budgeting needs to happen in real time. You cannot keep track of it in your head through the month. If you try, you will fail. Okay, that was also a little harsh. But, really.

Getting Started

And now on to starting a budget. Johnny and I track every item, but we keep each item in a broader category to keep things easier. Our main categories are these:

  • Home/Rent (or Mortgage someday)
  • Tithing
  • Utilities
  • Food/Groceries
  • Personal
  • Everything Else

Pretty simple, right?

What you don’t see is that those main categories have lots of subcategory babies running around wreaking havoc on our budget each month. But that’s okay! The sub-category numbers can get as crazy as they want as long as the main category numbers stay on track.

I like to relate things to real life, so here comes a metaphor. You’ve been warned.

I was a restaurant server for a few years. And my main goal was to make everything appear perfect to the customers I served. Behind the doors of the kitchen, all hell could be breaking loose (and usually was). People were burning themselves on the ever-hot fajita skillet, someone was slipping on a spilled smoothie, we were low on silverware, the new guy had just sliced his hand open — you name it, it happened — but as far as the customers knew, all was well.

And that’s how your main categories should be. Even if your subcategories are spastic and refusing to stay in line, no worries as long as your main category numbers stay within budget.

Sample Categories

Here’s an example of how a main/sub relationship works for us:


  • Everything Else: $550


  • Netflix
  • Pet Supplies
  • Clothing
  • Dry Cleaning
  • Personal
  • Gas
  • Home Care
  • Entertainment
  • Medical
  • Gifts
  • Misc.
  • Baby Supplies

As long as all that stuff stays under $550, we’re good. For that particular category, we don’t have a number for any of the subcategories since they vary so much. But to be clear, we’ve estimated the expenses for all of those items. And we revisit that category every few months to make sure our total amount is still where it should be. For other categories, we do keep exact numbers for the subcategories. Here’s an example:


  • Utilities: $508


  • Electricity: $75
  • Gas/Heating: $75
  • Cell Phone: $140
  • Internet/Cable: $100
  • Water/Waste: $40
  • Auto Insurance: $78

Some of our utilities vary from month to month, and some don’t. Sometimes our electricity is less than $75 and our gas/heating is more than $75.  But as long as the total Utilities number at the end of the month is under $508, we’re happy campers.

We like this approach because it allows us to keep an itemized budget without stressing over every tiny detail. If our baby girl spits up all over our clothes every day for two months straight and we’re suddenly spending much more than anticipated in the Dry Cleaning subcategory, it’s okay. The main category is what we worry about.

Got it? Good. Still confused? Are you a visual person like I am? Then check out our April budget for a closer look.

Choosing Your Medium

Johnny and I use an app to track our spending. We always have our phones on us, so we’re able to update our budget immediately after making a purchase. And it syncs to both our phones. We use the HomeBudget app, which we love. But there are many apps out there, so find the perfect one for you.

If you do better with pen and paper, there are thousands of printable budgeting worksheets out there. Type in “Budget Worksheet” on Pinterest, and four hours later you’ll still be scrolling all the options.

A few last thoughts

The first month is a crap shoot. If it’s your first month budgeting, you’ll be doing a lot of guesstimating. Don’t you love that word? It leaves so much room for error. And there will be errors. You may think you spend less on food than you actually do (this is a common one). Or that your Starbucks habit isn’t as bad as you thought (this is a less common one). After the first month, you’ll be able to come up with better numbers for each category, so hang in there.

Each month varies. Life happens. Unexpected expenses arise. It’s okay. If your budget doesn’t work out once (or even a few times) for one reason or another, just brush yourself off and start again the next month.

Every cent should have a place. Calculate how much income you bring home any given month. If it varies from month to month, guesstimate. And then figure out how much will go to spending and to saving. And make sure you follow every cent until it finds its place of rest. Don’t leave any cents unaccounted for. It’s a dangerous world out there… I’d hate for something bad to happen to them.

Okay, I’ve started making cheesy threats. That’s my cue to wrap things up.

It doesn’t matter how you go about it. What matters is that you do it. And stick with it. When you’re thinking I hate this freaking budget. Why did I start it? (because,  if you’re anything like us, you will think that), just try to focus on those long-term goals. The first month’s the hardest. And if nothing else works, email us, and we can lament/love our budget-friendly lifestyles together.

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  • Reply Elvin @ Journey To Millions June 12, 2013 at 8:50 am

    In budgeting, the simpler the better. We also adopt the same principle. We have a big category (Utilities, Basic Needs, Entertainment, Goal Fund etc) and lots of subcategories. As long as we stick to our budget for the big categories, we’re good.

    There were months when we overspend. Those months provide us a good feedback to re-adjust our budget. It’s a signal that our budget needs some tweaking.

    We tried countless apps to monitor our expenses but I found our own spreadsheet easier.

  • Reply Rob June 12, 2013 at 8:53 am

    All good stuff about setting up a budget, Joanna. I’ve been doing this stuff for over 50 years now, right after I graduated from high school and started earning $$$. I’d add one more thought however. Setting up a budget and sticking to it is fine but one more thing to consider is to record it somewhere – like in a spreadsheet – each month, year after year. By doing this I can then improve on the accuracy of my budgeting “guestimates” by spotting trends in my expenses and spending. By looking back over past expenses, such as car repairs for example, I can then better determine when it’s best to start saving for anticipated future expenses, like a new car (rather than continue to throw increasing amounts of money trying to keep the old rattle trap running)! Follow me? Some expenses are pretty consistent, month over month, while others may occur on a quarterly basis or annually. Reviewing past budget vs actual monthly records allows me to better anticipate and deal with upcoming expenses. And, as we all know, the best way to save $$$ is to know exactly where all our money gets spent each month. And I would say the other best way to save is to invest our savings wisely – but that is a topic for another time.

    • Reply Johnny June 18, 2013 at 12:44 am

      This is definitely one area we can get better at. I mean, our expenses stay in our phone, but we never look over them again. When we first started budgeting, I used to use Excel spreadsheets and it was much easier to go back through old budgets. Good point.

  • Reply Heather June 12, 2013 at 9:35 am

    I actually changed my budgeting ways when I read one of your budget updates 🙂 I used to try and itemize every little thing and keep everything consistent month over month. I ended up getting stressed when some amounts varied every month. Now I figure that as long as I am not spending over what I make every month, I can be more flexible with the budgeting. So I take each month as it comes.

    I have my fixed expenses (rent, phone, internet, bank fees, tenant insurance, RRSP contribution, and debt repayment). I also include in there a “sinking fund” which is an amount I transfer to another savings account to save up for stuff that comes up infrequently (e.g. taxes) or stuff that I want (e.g. clothing, a vacation, my cross country skiing and curling costs in the winter…you can tell what country I come from!).

    My variable expenses are in fairly broad categories now – food (just groceries), a small amount for eating out (which I rarely use because I hate eating out), transit, and, inspired by you, everything else. Everything else includes necessary things like medical co-pays, or if I need something for house, but mostly is for “fun stuff”. But considering I only have a set amount in that budget line, I have to decide if I really want that book, really want to go to that movie etc.

    I don’t use any apps to spend my tracking. I’m a bit more of a Luddite – I keep my receipts and at the end of the day, I input it in a spreadsheet.

    This works for me, but so far I just have to keep track of me. I’m scared to think what might happen if someone else enters the picture!

    • Reply Johnny June 18, 2013 at 12:49 am

      Curling costs!! So cool!

      I used to swear by the save receipts, input in a spreadsheet at day’s end method. It worked really really well while we were in school and we only had minimal purchases each day. Now that we’re both on the go, we’ve found the synched iPhone app to work better. But sometimes I still think we were more effective doing it the manual way.

      And I’m glad to hear the Everything Else option is working for you! Everyone has their own preference, but we really liked losing some unnecessary stress on categories that we just couldn’t predict.

  • Reply Sara @ Fit.Fun.Femme June 12, 2013 at 10:23 am

    You guys are so great! I’ve been waiting for this budget post since you first started talking about it. We tried for a while, but it seemed so detailed it was just too much to mess with. Maybe we over categorized everything…whoops! Can’t wait to get going with your method. Thanks guys!

    • Reply Johnny June 18, 2013 at 12:50 am

      We had a rough go with Mint, too. Others swear by it, but it just made us feel more anxious than anything else. Best of luck!

  • Reply Jake @ Common Cents Wealth June 12, 2013 at 11:39 am

    This is great advice. My wife and I run a pretty tight budget and we manage it very similarly to you guys. There may be some categories getting out of control in any given month, but as long as the whole budget is in check then we’re okay. It’s a total pain to keep up with it, but it’s well worth it.

  • Reply Halsy June 12, 2013 at 5:07 pm

    The everything else category is intriguing. I need to think that one over. We currently are trying to figure out a way to keep our budget more in real time but without too much extra work. I always have a pretty good idea but am not constantly putting receipts into our spreadsheet.

  • Reply Chris June 12, 2013 at 6:25 pm

    I like the 30,000 foot view approach. I tend to micromanage my budget which isn’t necessarily bad, but it can get overwhelming at times and cause complete shutdown. Which is basically what happened last time. I like to equate this to people who go from 0 to 60 on fitness. They quickly burn themselves out since they aren’t used to it.

    • Reply Johnny June 18, 2013 at 12:51 am

      So that’s why I quit P90X the last twenty times I tried it. Alright, it was only twice. But still.

  • Reply MomofTwoPreciousGirls June 12, 2013 at 8:44 pm

    Love love love this concept! Probably takes a lot less time to do it this way…not totally overwhelming. Did I say I love this? Just gave me a big aha on how to make this simpler. At the end of the day after work, kids, meals and household chores there is not a lot of brainpower to get into the nitty gritty of all those numbers. I just want to curl up with my Oreos and a good tv show! I am going to need to try this.

    • Reply Johnny June 18, 2013 at 12:53 am

      It’s all about finding a system that works for you. So long you’re keeping track and hitting your goals, you can tweak the system however you want. Let us know how it works out!

  • Reply EcoCatLady June 13, 2013 at 4:36 am

    I tend to group my budget items by function rather than type because it helps me to think outside of the box. In other words, I put mortgage, insurance, electric, gas, water etc all under the category of “housing,” and auto insurance, gas, car repairs, parking, tolls etc under transportation. It really helps me to see that no expense is “fixed” and there’s always another way to meet a given need.

    I even split things out that you’d normally group together. Like, I’ve got 2 separate bicycles – one fancy road bike that I ride for exercise and recreation, and one old heavy hybrid that I use for running errands. So expenses for the road bike go under the “fun” category while expenses for the other one bo under “transportation.” It helps me when I’m trying to make decisions like – should I buy those groovy bike bags for my hybrid? If it will save me money each month in gas and vehicle wear and tear for running errands it’s a completely different question than if it’s just an expense that’s lost in the “bicycle” category.

    • Reply Johnny June 18, 2013 at 12:55 am

      Interesting system. I like it. Most of those categories would be pretty fixed for us at the moment, but I could totally see us adopting this method as our expenses increase and vary.

  • Reply Alanna June 13, 2013 at 5:31 pm

    In regards to these categories or any categories, what do you do when you are buying something at one time that fits in a few categories? For example, buying some grocery/food items at Costco buy maybe also a few of the clothing items. You pay all at once for everything so do you guesstimate that $20 was for clothes and $80 was for groceries or just lump it all under groceries?

    • Reply Johnny June 18, 2013 at 12:58 am

      Awesome question. When we get in the car, or when we get home, we usually pull out the receipt and divy up the expenses. Typically, it’s just one or two extra categories besides Grocery, like Pet and Home. It’s not an exact science, but we do like to stick to our numbers as close as possible so that we’re not going over/under in certain categories because we miscategorized our purchases.

  • Reply Kristy @ Kristy's Health Revolution June 14, 2013 at 8:54 am

    Love this series, and I hope there is a part 3, 4, 5 and beyond!

    I downloaded EEBA and have started using it religiously (picture me standing at the grocery store after check out, entering my spending into my phone so I won’t forget), and I like it! Originally, I was using a Google Spreadsheet which was a little less convenient, because I had to be at a computer (the app isn’t very friendly for quickly entering info). Anywho, I was wondering if you thought I should upgrade to the HomeBudget app. In the original post on apps, you said you enjoyed the sync up feature, however, I’m not sure I need that feature — I budget for all the shared expenses in our home, but my fiance and I still keep separate accounts for personal use (it just works for us). He’s not as into budgeting as I am! So, I guess my question is: Other than the sync feature, is there any features that the HomeBudget app has that EEBA doesn’t that would be worth the $5 upgrade?

    • Reply Johnny June 18, 2013 at 1:01 am

      Good question. Honestly, I think what you’ve got is probably fine without forking over $5 for HomeBudget. The synching is really what makes that app worth it for us. We like the look/feel of the app, but at the end of the day, all you need is something that’s convenient and ready to track your expenses on the go. So keep on keeping on with EEBA. And congrats on the upcoming wedding!

  • Reply Melanie June 18, 2013 at 3:52 pm

    Well, I am sure I’m Type A because I actually enjoy micromanaging my money. Maybe it’s because I like “doing numbers” and looking at charts of spending and everything. Maybe it’s because I’m only a few months into budgeting so it’s still “fun.” I also think once I pay off my debt-by the end of 2013!-I’ll just be setting up an automatic savings and my budget will need far less managing than right now with my debt payments, etc. Who knows, but unlike the majority, I enjoy and like the small categories I’ve set up like coffee, pet supplies, Netflix, etc. I guess as long as these different ways work for all of us, it’s all good! 🙂

    • Reply Johnny June 22, 2013 at 11:46 am

      Haha. You know what’s funny is I was the exact same way when we first started. I LOVED getting into the minutiae and charting everything like crazy in Excel. I think some of that excitement wore off over time, but I totally hear where you’re coming from.

      To each his/her own — so long that budget gets done!

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  • Reply Megan Wise April 29, 2015 at 10:57 pm

    Budgeting is the only way to go! Once you get used to it, it saves time. My husband and I actually plan out how much we will spend on categories like groceries, out to eat, gas, etc. Then, we take cash out each week to use. Using cash helps us stick to the budget SO much better. We’re so close to paying off all our debt that we don’t want to prolong that process by overspending. Does anyone else use an envelope/cash system? Not sure how sustainable it is?

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