Budget: Resolutionize Your Finances

by Kay Lynn

This is the first in a four part series on Resolutionizing your Finances. Visit Other Better Living Network sites focusing on other areas of your life.

Do you wonder where your money went at the end of the month?  If you don’t know that tells me you’re not preparing a zero-based budget or maybe any kind of budget.

I used to work that way.  I paid my bills and whatever was left over was spent without any kind of plan.  Not anymore!  If you want to control your money instead of the other way around, then keep reading.

Action Plan

This is a simplistic three step approach to budgeting.  I could write a whole book on it (and I may yet someday) but this will get you started on making a change TODAY!

Create Financial Goals

Money is a tool that you need to put to work for you.  Creating a plan gives you direction.  To get you started, think of it as a financial wish list.

What do you want to accomplish in the next year?  This will be the priority for excess income in the budget.  Then add in some mid-range goals for the next five years and then long term goals such as save $1 million for retirement.

Track Spending

It’s hard to know how much money to allocate to the various budget categories if you don’t know the dollar amount spent every month.  For one month just track where every dollar goes.

When I went through this exercise at the start of my Financial Peace journey I put all receipts in the same pocket in my purse and wrote down the few cash transactions on a small notepad.

Draft A Budget

Armed with the information from the previous two steps, you are ready to draft the first budget.  It’s a draft because your budget should be continually evolving.  I tweak mine month to month based on how it went the previous month or the time of year (higher utilities in February than April).

Create categories based on the spending you tracked.  Common categories are housing, utilities, food, transportation, clothing, entertainment, personal (hair, pet, etc.), medical, savings and charity.  If you have debt, don’t forget that one!

Start building out how much money in each category and add line items for the various costs.  For example, in the transportation category I have three line items: gas/oil, maintenance and insurance.  Once I become debt-free, I’ll add a line item for car replacement.

Don’t forget to plan for non-regular expenses.  Some examples are property taxes, insurance, and car registration.  They don’t happen every month but when they do it can be a pretty big bill.

Plan for every dollar! If you don’t this money will end up accounted for at the end of month.


There are lots of resources online to help you get going.  Start with these five free budget tools. There’s really more than five as J. Money’s budget template page has at least 20 different choices.

You can also find help in personal finance books.  Save money and check this section out at the library.

Sign up for the LearnVest financial boot camp. You’ll get a series of emails starting today and they have a free budgeting webinar on January 12th.


This should get you started and next week we’ll take a look at savings.   By the end of the month you’ll be in charge of your finances.

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MoneyCone January 3, 2011 at 11:07 am

Good tips Lynn! Some credit cards categorize your expenses automatically. This is of great help in figuring out where your spending goes. Discover does this, not aware if other cards do it as well.

And from your budgeting tools, can’t say enough good things about Mint!

LifeAndMyFinances January 4, 2011 at 3:33 am

I am extremely excited about 2011 since both my wife and I are in agreement on our budget (she was actually the one that made it which is awesome!). If we can pay off our debts by March, we will definitely start our exponential growth toward financial freedom! 🙂

Kay Lynn January 6, 2011 at 5:48 am

@ Money Cone, I think most credit card statements do this as well. I am trying out Mint this month and will share my thoughts next month. Lots of people like it!

@Life and my Finances, Being debt-free in March is awesome! I’m looking forward to your post on that achievement.

Jesse January 4, 2011 at 7:53 am

This is a great resource and I’m looking forward to the rest of the series. I think the hardest part to getting started with a budget is just getting started 🙂

Thanks for sharing!

First Gen American January 4, 2011 at 8:48 am

I have a hybrid approach. I create a budget of what I think I can save every month with a plan for where that money would go (right now, extra goes to mortgage). Anyway, some months I miss the goal and other months I exceed it but at the end of every month, the any extra goes to mortgage. It helps keep the spending in check without feeling totally tied to a number.

Kay Lynn January 6, 2011 at 5:50 am

@Jesse, thanks for the kind words. I wanted to help someone get started so it is basic.

@ First Gen American, that sounds like a zero-based budget since you plan for all your money each month. I do the same thing with money I don’t spend in a certain category.

krantcents January 4, 2011 at 9:02 am

Good approach! Learning about different strategies actually might motivate people to pick one that works for them. For example, my plan spells out all the steps with daily tasks.

Buck January 4, 2011 at 2:51 pm

Terrific article. I have everything in Mint.com, but I think because most things are in there, I kind of take it for granted. Also, I’ve been quite lax with cash transactions. Thanks for the tips and hopefully I can track my finances with more detail! 🙂

Aloysa January 4, 2011 at 8:26 pm

Thank you for the tips. We all can use them. Setting up financial goals is imperative. Otherwise, how do you know which direction you are going?

Kay Lynn January 6, 2011 at 5:53 am

@ Krant Cents , if we all put enough ideas out there hopefully there’ll be an approach for everyone looking for help.

@ Buck, I had to try Mint with all these great recommendations. Stashing your receipts and then reviewing every week will help you know where that cash goes.

@ Aloysa, Exactly. You can’t measure progress without knowing where you started and where you want to go.

Brandy January 5, 2011 at 5:37 pm

Great article, I agree that everyone should have a budget, it really does help.

Kay Lynn January 7, 2011 at 6:13 am

Brandy, you’re so right. As the saying goes, “Failure to plan is the same as planning to fail”.

Crystal & Co. January 6, 2011 at 6:36 pm

This comes at a perfect time as we start a new year! Tracking your spending is certainly a must!

The Passive Income Earner January 6, 2011 at 10:40 pm

Nice article.

I often use the analogy of a company to teach individual to be in the green. For a company to make profit, it needs to make more than it spends. To find out if you make more than you spend, you need good accounting (that’s the tracking). To improve the profit, you need to optimize your spending (that’s the budgeting). Only then, do they start using loans to expend and grow the business. Different loans have different risks and benefits and all loans should be categorized. Credit card debts are the worst. That’s a sign for bankruptcy if you stick to the company analogy because it means you are operating on loans from day-to-day. Would you invest in a company like that?

I believe the tracking is more important to get right first. Then comes the budget.

Kay Lynn January 7, 2011 at 6:24 am

@ Crystal, good point about the importance of tracking. That is why so many people use cash; when it’s gone they just stop spending.

@ Passive Income Earner, your analogy is wonderful. I’m going to use that when talking to people about budgeting. I made the same point about setting goals on one of Sam’s posts. Successful businesses set goals, so why wouldn’t an individual want to do so.

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