If you want to get ahead with your savings, there is only one rock-solid way to make sure you are accomplishing goals that put you ahead.  Creating a budget will show you exactly what is coming in, going out, and being saved.  However, not every budget is created equal, and every budget should be created with a specific goal in mind.  In this post, we will teach you the basics for creating a simple savings-oriented budget geared towards accomplishing a specific goal, whether you want to save for a vacation or just want to pay off a credit card faster than paying the minimum due.

According to Investopedia, a budget is an “estimation of revenue and expenses over a specified future period of time.”  In lay terms, this simply means that it is a black-and-white listing of your income versus your expenses used as a guideline for saving towards something over time.  A budget is a very powerful tool, as it forces us to face the reality of our spending habits, and as such, can have a very strong effect when it comes to motivating us to save for some future event instead of striving only for instant gratification.  Thus, using some very simple steps, you can create your own monthly budget that will allow you to save for a certain event, be it a vacation or the end of society as we know it, by adhering to the simple rules that follow:


Step One:  Set a goal.

The first step in creating any budget is identifying what your goal in creating the budget is.  Do you just want to be able to set aside extra money each money to go into your rainy day or retirement fund or do you have your eyes on a new 4K home theater?  Clearly defining the reason behind making the budget in the first place will give you something to work towards as you gradually see your savings grow.  The goal does not have to be a tangible good, either; so don’t get bogged down in focusing on something specific.  Rather, your goal can be completely abstract, such as “I want to save more than I did last year.”  No matter what you choose as your goal, make sure that it is something that is truly important to you as well as something that is reasonable and attainable.  Chances are, if you make $50,000 to $60,000 per year, you are not going to be able to buy a Ferrari and pay it in full in the course of a single year, so make sure that your goal is not something out of reach.

Another common goal that can be achieved by the use of a budget is getting out from under a load of collections debt.  If you are in the middle of repairing your credit and have some valid collections accounts that you cannot get removed via the dispute process, most debt collectors will work with you if you tell them that you are creating a budget and have “xx.xx” that can be spent per month towards satisfying your outstanding debts. While you are not taking a trip or saving towards your retirement by doing this, getting out from under bad debt is still a goal that can be achieved through the use of budgeting.

For the sake of this post, our example budget goal is going to be, “I want to take a vacation to Walt Disney World.”  This is a reasonable goal that many families choose every year to save for, so it works well for the terms of your budget.

For the sake of creating an easy-to-use example, let’s assume that you will need to save $500 to take your trip, including incidentals and extras.


Step Two:  Identify the Costs to Achieve your Goal

If you are planning to take a trip with the family to Disney World, you need to make sure that you understand that costs associated with the trip.  Will you fly or will you drive?  If you plan to fly, you will need to know the cost of airline tickets for your entire family, any extra charges for luggage.  What hotel will you stay in and how much is it per night?  Do they offer package deals?  This is the sort of information you will need.  For this step, you will be collecting information that you will put to use later in the process, but this information is vital for you to obtain upfront to determine whether or not your goal is something that can be achieved in the first place.

Once you have figured in the total cost, make sure to include funds to be used for incidentals, such as eating out, souvenirs, and other non-essential costs that will be part of the trip.

If you are using a spreadsheet program or are doing your budget by hand, label this sheet “How Much I will Need” and set it to the side.


Step Three:  Figure Out Your Net Monthly Income and Your Current Monthly Expenses

First, make a new sheet called “Income and Expenses.”

If you are paid one a week, for example, multiply your net pay (your “take-home” amount) by four to get your monthly pay.  For instance, if you bring home $500 per week, your net monthly income will be $2000 per month.

Next, draw a horizontal line across the page directly under your total monthly income and begin to list your expenses.  Your expenses are going to be rent, utilities, groceries, insurance, car payments, and other expenditures that come out of your monthly income.  If you are already placing money into savings on a regular basis, you would also want to include this amount into your expenses.

Once you have done this, whatever you have left over is known as your “surplus,” unless you have more going out than you have coming in, at which point it will be called a “deficit.”

A simple example could look like this:

Income Totals
Monthly Pay $2000.00
Car Payment -$200.00
Insurance -$50.00
Rent -$500.00
Utilities -$200.00
Groceries -$300.00
Savings -$100.00
Miscellaneous -$100.00
Totals Total Expenses -$1250.00
Surplus $550.00

So, as you can see, using our example budget, you would have $550.00 per month after all of your expenses and bills have been met and you place $100 in savings.  Keep in mind, this is just to give you an idea of how a budget will function.  Most people will have other expenses, such as credit card payments and other revolving monthly accounts that will need to be figured into your expenses. The point is that, once you have everything coming in and going out written down on paper, you can better manage your finances to meet whatever financial goals you have.  Whether the goal is the trip to Disney World or saving for a rainy day, the power of the budget is its ability to help you visualize where your money is going so that you can make realistic adjustments if necessary while giving you a realistic snapshot of how long it will take to achieve your goals.


Step Four:  Make any adjustments, if necessary. 

In our example, no adjustments would need to be made.  With a surplus of $550.00 per month after putting $100.00 into savings, the goal of $500.00 for a trip to Disney World could realistically and comfortably be met in under 3 months – and that’s being conservative with the amount being diverted to the Disney trip fund.  At this point, our sample budget maker may decide that he/she has enough coming in to stick more into savings, or to invest in cryptocurrency, or do something that could contribute to a future return on investment.

The most important thing to note at this point is that your budget will likely not be as clean and simple as the example budget.  For instance, you may be a smoker that has to budget in the cost of cigarettes into your monthly expenditures.  If this is the case, you could decide to roll your own and save yourself a couple hundred dollars per month depending on the state that you live in and how much you smoke.  The price of groceries and gas could increase from the current low prices that we are enjoying, which would eat away at some of the monthly surplus.  However, having your budget and following it will put you in a much better position to handle unexpected expenses than someone who just throws their money in the bank and uses a debit card indiscriminately until overdraft fees start to occur.


Step Five:  Stick to It or Throw It Away

Let’s face it – a budget is completely pointless if you do not stick to it.  When you decide to go from a non-budgeted household to a budgeted one, you need to inform all members of your family that are old enough to understand. Since household budgets are usually quite a bit more complex than the example given, it is likely that you will want to eliminate expenditures from unnecessary categories and shift those dollars to more essential areas.  Because budgets usually include saving for a certain goal over a period of time, it should be expected that you will identify spending habits that can be adjusted to eliminate needless waste of income.  Either way, once you have created your budget, it is pointless unless you stick it.  Once you have notified your household that a budget will be going into effect, there may be some grumbling and griping.  Carefully listen to whatever the complaints are to see if a family member has identified something that you missed, but also compassionately explain that the reason for the budget is so that you can provide a better future quality of living for all.



A budget is a very powerful tool the can be used to gain control over your finances.  The act of physically visualizing your income versus expenses allows you to make decisions that not only serve the present, but prepare you and your family for the future.  Budgets can be very simple, such as the example given in this post, or they can be complex documents that guide the spending of an entire nation.  The bottom line is that it is just plain smart money management to budget your income wisely, and once you have decided to live by a budget, you will see how powerful of a tool one can be.  While it may feel as though you are restricting yourself in terms of financial freedom for the immediate time being, the goal of the budget, in the end, is to give you more financial freedom in the future, which is exactly what will happen if you stick to your plan.


Source Material

  1. Investopedia. What is a Budget?  Retrieved from https://www.investopedia.com/terms/b/budget.asp