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31 Day Budget Challenge | Creating a budget that works

Create a Budget without feeling deprived

Create a Budget without feeling deprived



I am re-posting this because I feel it is such a great post! A lot of people feel as though budgets are too restricting.. I’m here to prove that it isn’t! This post is part of the 31 day budget challenge– which is here to help you overhaul your budget in just 31 short days! Today we talk about creating a budget that works without feeling deprived.

Find the rest of the 31 day challenge posts at the end of this page.

Creating a Budget that works

A budget can be a scary idea to confront. After all, who wants to feel like they can’t spend their money as they please?  Well the truth is, setting a budget can actually help you find financial freedom, not restrict you. Take a look below at some helpful tips on how to create a budget. You will find that creating a budget can be simple, painless, and an effective way to manage your money. Take a look at how to get started.

Step #1. Track your expenses for 1 month.
For this step, you will need to be brutally honest with yourself. Whether you spend .25 on a piece of gum or $250 on a pair of fancy shoes, you need to document it. write down EVERY thing you purchased in the last two weeks. (this might require LOTS of thinking 😉 )

Step #2. Categorize your expenses.
Now, sort your spending into categories. They should read as follows: Housing, Food, Utilities, Clothing, Education, Automobile, and Entertainment. Each of your items should fit into one of these expense categories. If not, create a MISC. category for those items to go in.

Step #3. Reflect on your earnings.
In this step, you need to take a realistic look at your earnings. Gather your pay stubs to get an idea of your take home every month. How do your earnings pair up with your spending? Your earnings should be greater than the sum you came up with in step #1. If not, prepare to make some cuts. We will tell you how to do that in step #6.

Step #4. Weigh your expenses.
You now know what you spend and what you earn. So, it is time to figure out how you should disperse your earnings to pay for the things you need, and even want. A breakdown of your spending should look like something like this:

– Housing (your rent or mortgage) : 25% of your take home pay.
– Food (grocery store trips, dining out, school lunches): 20% of your take home pay.
– Utilities (heat, electric, cell phone, water, cable, internet): 15% of your take home pay.
-Clothing (work uniforms, kids clothes, dry cleaning): 5% of your take home pay.
-Education (tuition, school loans, book fees): 10% of your take home pay.
-Automobile (gas, oil changes, car repair, car payments): 15% of your take home pay
-Entertainment (movies, games, trips, etc.): 5% of your take home pay.
– Savings: 5% of your take home pay (PLEASE don’t ignore this section. An emergency fund or savings is important for those unpredictable moments)

Example: This means if you make $3000 a month, then 5%, or $150 a month can go towards clothing. If you make $3000 a month and have rent or a mortgage, no more than $750 should be going towards it. If you find yourself spending more than these amounts, you are living beyond your budget.

On a side note, if you don’t have educational expenses, you can distribute that 10% elsewhere into the budget. In fact, you can do this for any of the categories that don’t pertain to you.

Step #5. Create a spending folder for each spending category.
Buy 8 folders (one for each category) at your local dollar store. Write the name of each category on the front of the folder. Inside each folder will go a variety of materials. Include the bills for that particular expense. You can also include an envelope with the money set aside for that expense each month. For example if you have allotted 5% of your $3000 a month salary towards entertainment, keep the $150 in an envelope in the folder. That gives you about $35 a week to use on family activities, movies, etc. When the money is gone, you are not to use any more towards that item until the next month replenishes it. Feel free to add money saving articles, goals for that category, or other helpful info in the folder as well.

Step #6. Use your folders daily.
Spend a few minutes with your folders daily. Take a minute to look at what you spent for the day and what your funds look like for the rest of the month. This will help you stay on track and not deplete your determined amount before the month is up.

Step #7. Use your budget to set goals.
Perhaps you have your eyes on a new winter coat. Based on the example above, you have $150 a month for clothing. If you have a family of 4, that doesn’t leave much for the new coat. Instead of feeling deprived, feel motivated. Perhaps you can cut your entertainment spending for the month down to 2%, or be conscious of your utility spending and cut that area down a few percentages. You can then carry those percentages over to the clothing category, giving you some money to buy the item you wish to have.

Sure it takes some work at first, but once you set a budget you will find it a habit that is easy to stick to. The folder system mentioned here is a great way to keep your budget organized, and the percentage system we have shown you as an example is a great way to make sure your money is going towards the things you really need.

Disclaimer: I am not a financial professional.. I’m just a mom who wants a budget that works. 

Read more: Organize Your Desk On A Budget With Ease



  1. Beth

    October 2, 2014 at 5:16 pm

    Thank you so much for all of these tips. Time sit down and track what I’m spending, I’ve got a feeling I won’t like what I see..

    • Josie

      October 2, 2014 at 5:30 pm

      You might not like it.. but its okay to start new! 🙂

  2. Pam Tuey

    October 2, 2014 at 6:59 pm

    I know most of you are young and think you have forever to save for retirement :), are you including that in the 5% ? (Savings)

    • Josie

      October 2, 2014 at 7:07 pm

      Pam, I consider savings as retirement! So, it could fit in there perfectly. 🙂 This of course is all just a rough example of where people should be putting their money.. I know some categories do not pertain to everyone.

  3. Meryl

    October 3, 2014 at 5:44 am

    I love this Josie- thank you!! But I wonder: How is it possible to live in So Cal and only spend 25% of your income on housing? I would need several roommates and to share a room!

    • Josie

      October 3, 2014 at 8:54 am

      Meryl, I think it’s possible. We currently do! I think every situation is different..if 25% isn’t enough, you can take an expense that you don’t have on the list and add that to housing. So, if you don’t have education expenses or maybe you only have 5% expense- you can add that to housing which would give you 40% for living.

      • Meryl

        October 4, 2014 at 12:17 am

        Thanks Josie. I am DEF motivated!! I just received some perfume which I really love called Billionaire Boyfriend 😉 LOL! I love that you always challenge and inspire your readers!! Thank you for that!!


      October 3, 2014 at 4:27 pm

      thats what i was thinking i spend about 50% on just that but that the price you pay to live in cali

      • Valerie

        October 22, 2014 at 11:28 am

        I laughed so hard when she said 25% on housing! I have been in the same apartment for 10 years so i pay well below average for my neighborhood but it’s still about 50% of our income.


    October 3, 2014 at 4:32 pm

    thanks josie i love your tips. i cant wait to really start budgeting once i pay off my credit card so i can put my money in an envelope and really save. By the way i love your website and check it daily. thanks

  5. Raquel

    October 4, 2014 at 11:42 am

    where would you put credit card payments and car insurance? thanks!

    • Josie

      October 4, 2014 at 1:01 pm

      I would put car insurance under automobile expenses. Credit card payments I would add to education. You can also add your own category if you would like 🙂

    • sophia

      October 6, 2014 at 1:45 pm

      I would suggest a “credit card payment” category is not needed as the purchases you are making with your Credit Card, should fit into one of the categories…

      Possibly taking from another expense to pay past credit card debt could help motivate you to “get rid of” that expense.

  6. Valerie

    October 22, 2014 at 3:11 pm

    Question: where would you categorize child support (outgoing)?

    • Josie

      October 23, 2014 at 9:14 am

      you could add that category for yourself.

  7. Dee

    January 28, 2015 at 9:36 pm

    I agree with the 25% income but it seems pretty much impossible to live in southern california with that. We have a very reasonable rent for orange county (1700 – 4 bedroom house) and we are close to 50% of our income. We would need to be bringing in close to $7000 a month to get to that 25% mark! That would be $42.50 an hour!

  8. Newbie Budgeter

    January 29, 2015 at 1:13 pm

    Everyone has their own percentage they can change the categories to, but you gave a GREAT start up list Josie! Thank you!

    I wanted to ask where you put your toiletries?.. toilet paper, soap, floor cleaner, etc. etc… I know we coupon and stock up for most of it, but would you put it under food?… since its usually part of our grocery shopping?

    • Josie

      January 29, 2015 at 4:27 pm

      Yes, it stays under the food category 🙂

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