How To Create A Budget That Saves Money


Is overspending and impulse purchases one of your biggest weaknesses? How about setting up a simple budgeting system to keep yourself accountable? 

Sometimes, Grandma’s methods to save money works best. In the past, people used to keep cash in envelopes to keep track of their spending. In today’s culture, however, the rise of credit card lifestyles and e-wallets have made counting cash a thing of the past.

The envelope method of saving money can actually be replicated today by using an Excel spreadsheet or Numbers software in Mac. If you will like more features or convenience, there are probably some good personal finance apps out there that help you track your income and spending.

Here’re some rules to follow when setting up the envelope system to track your personal spending:

Budgeting Every Income & Paycheck 

While it may be hard to do this, schedule 1 hour on the 1st Monday of every month – put down all your expected income and its sources. This may be hard in the beginning, but if you are going to be successful at budgeting, you need to get started.

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Create Categories for Your Spending 

You know each month you have to pay bills for food, utilities, transport, new clothes and entertainment? Yes, fill these up accordingly.

Forecast Your Spending for Each Category 

Now, I suggest this based on what I learnt working in previous investment analyst roles. Always forecast your expenses 1 month in advance. Have a forecast for each category above – food, utilities, transport, new clothes and entertainment. If you think you will spend $500 on food, put that down.

Sometimes, expenses can pop out of nowhere. I suggest setting aside a contingency fund of $500 to take care of this. If you end up not spending it, it goes into your savings at the end of the month.

Budgeting Your Personal Monthly Income Statement 

Now that you have completed the above steps, you have your 1st personal income statement for the month! Congrats! In accounting, you have a Net Profit after you use Income – Expenses. In your own personal budget, simply consider this Net Profit as the Monthly Savings that you get.

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End of the Month Tally 

Remember, the above is just a forecast. What you need to do as a final step, is to tally up the actual numbers at the end of the month. You can have a column for variances – to check if you overspent on your forecast.

Here’s how it looks. Notice how simple it can be?

Categories (Monthly) Forecast ($) Actual ($) Variance ($)
Income - Job4,0004,000-
Income - Side Hustle 500300(200)
Total Income 4,5004,300(200)
Expense - Food(500)(450)50
Expense - Utilities(300)(300)-
Expense - Transport(300)(250)50
Expense - Clothing(200)(280)(80)
Expense - Entertainment(500)(600)(100)
Total Expenses (1,800)(1,880)(80)
Net Savings 2,7002,420(280)

Give it Some Time 

When you are adjusting to a new personal budgeting system, you may find it difficult to keep going in the beginning. Don’t give up after a month or two! You’ll soon get the hang of it and reap the benefits of keeping to the envelope system. Next, see how it helps you reduce credit card debt, save money, build wealth and find financial peace!

Have Fun Budgeting

The best way to keep to a good habit is to enjoy doing it. While it may be hard in the beginning, maybe you can try giving yourself a small reward for sticking to the envelope system as you go along. Say, for example, give yourself a nice treat at your favorite restaurant at the end of each month.

Just remember to budget for it!

What are some systems you use to save money? 

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  1. i’ll have to send this article to my friend, she really needs help with a personalized budgeting spreadsheet and keep track of her impulses

  2. It might be tough to get started for many, but the rewards of budgeting has been amazing for me for the past few years. Plenty of (free) mobile apps these days that can do this, too. I personally perfer YNAB,

  3. I think the most important aspect of budgeting is to know how much you need first. As such, I think it’s important to track how much you spend before you can start budgeting what is a realistic figure for yourself. Having said that, I have been tracking my expenses for a few years now but when I set my budget for this year, it seems like I am ready to blow it. On hindsight, there are a few big ticket expenditures which we didn’t quite think would come in but ended up incurring.

  4. knowing how much you earn and how much you spend well in advance is the right way to go. appreciate that neat spreadsheet too! very well organized! 🙂

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