I’m nothing if not a "Type A" personality. What I’m discovering, however, is that this trait does not serve me well in sticking to a budget. The reason being, I get too easily bogged down in details. So I decided it was time to simplify. I’ve realized that the best way for me to budget is if I split my budget into categories and then trim away at them (that way I’m grouping them instead of looking at every last cent). Learn how this simple change can help you stick to your budget!

Trim your budget categories

Your goal with this is to break your budget down into categories. You should have enough categories to understand what you spend and where you spend it (so that you can trim spending where possible).

This is what you do:

  • First you’ll list out your fixed expenses. These are expenses that never change (your mortgage, car note, homeowner's insurance, etc.).
  • Then you’ll list out your variable expenses. These are expenses that vary monthly (your electric bill, water bill, gasoline bill, grocery bill, etc.).
  • Now, see what major categories each bill falls into (for instance, categories could include: home expenses, car expenses, utility expenses, phone expenses, etc.).
  • Finally you’ll list out each major category, itemize each expense beneath the categories you came up with, and then total each category. This will tell you exactly what you’re spending per category, and now you’ll be able to see how much of your monthly income is being consumed by each category. This will help you visualize what you should cut by having your budget more simplified.

Resources to help

I like to use a simple Excel spreadsheet to keep my monthly budget, but I’ve also used other resources to help me define my categories and learn how to analyze them.

Here are some resources I love:

  • Mint.com: Mint not only guides you through creating and analyzing categories, but it’s also a place where you can view all of your finances in one place (such as banking, credit card statements, retirement savings, etc.) and you’ll get bill alerts through Mint. You can even easily pull a free copy of your credit report. Mint also offers a mobile version so that you can keep your finances in the palm of your hand!
  • ReadyforZero.com: Ready for Zero was created to help you pay off debt. You can access their service online or via the app to see all your finances in one place and track your progress in paying off debt.
  • Dave Ramsey: Dave Ramsey is nearly a household name these days, and it's not just because he’s been bankrupt—and bounced back—twice. Ramsey's tools really work, and I've used his resources for years (his "envelope system" is especially useful for creating budgeting categories that work for you).

Know your spending history

Once you’ve simplified your budget categories, you’ll have a much clearer picture of where you may be over-spending (which can keep you from paying off debt, saving for retirement, and enjoying life).

But the way you identify exactly where you’re overspending comes through analyzing your past spending history. If you’re just starting to keep a budget, you’re beginning to build your past spending history right now!

What to do:

  • Aim for creating three months of past spending history.
  • You can use those three months as a representative sample of what you spent last year.
  • By comparing your monthly net income to your monthly net spending, you can see where you have consistent shortfalls.
  • By comparing spending in each category, you can see what percentage of your net income is consumed by each category (for instance, if 60% of your monthly net income goes to your mortgage, and research tells you that you should be spending no more than 28% on a mortgage payment, you know you need to make a big shift in this category!).
  • You can analyze expenses versus income in each category by using expert percentages (Mint.com, ReadyforZero.com, and Dave Ramsey can all help with this!) and make adjustments as needed.


Need more budgeting tips? Make sure to keep up with our Budgeting Survival 101 series:

Budget Survival 101: Choose the Right Learning Tools

Budget Survival 101: Make Your Funds Hard to Access

Budget Survival 101: Change Your Bank

Budget Survival 101: Change Your Billing Cycle Dates and Use Auto-Pay

Budget Survival 101: Overestimate Expenses and Underestimate Income

Budget Survival 101: Simplify Your Budget