How to Create a Basic Budget

Creating a basic budget is easy. Knowing the difference between a want and a need is hard. Be honest with yourself about what you need versus what you want. Take control of your finances by setting financial goals and setting boundaries. Be realistic about how much you spend, and invest to make your money grow.

By Ciarra Maraj

Budgeting can be a scary task but does not have to be. Knowing where your money goes and how it flows makes financial planning easier. 

Kris Chellani is a real estate agent and personal finance guru. Chellani is best known for his social experiment videos on TikTok where he offers strangers money or the opportunity to double it and give it to someone else. 

To enlighten others about personal finance, Chellani created this spreadsheet to help budget and invest.

“It's something that only takes like five to 10 minutes that can save you thousands of dollars a year, just because it gives you that understanding of where your money is going,” Chellani said.

Whether you are in college or a seasoned professional, consider having a budget.

Creating a Basic Budget 

Pull your income together. Start with your needs: a place to live, utilities, groceries and a phone. Make space for indulgences, but avoid declaring a want as a need. Be realistic when deciding where to allocate money. 

This Bank of America article suggests adopting the 50/30/20 method. Fifty percent of income will go toward bills, 30% to wants and 20% to savings or debt. Dividing your income this way makes it easier to see what can be adjusted. 

The hardest part about budgeting is deciding what stays and what goes.

“If you have bills to pay and you have a Netflix account, do you really need that?” said Anh Tran, a retiring senior budget analyst in the Army Reserve. 

Going out to eat is fun but adds up fast. 

“If you go out to dinner three times a week for $60 each time, it ends up being [roughly] $10,000 a year,” Chellani said.

Strict budgeting is not successful budgeting. It is like putting your money on a diet – moderation is key. If you pay for multiple streaming services consider cutting the one you watch the least. If you go out three times a week, try going out once a week.

“If you create a budget that's super strict and confined, you're gonna end up going away from that and thinking, ‘OK, that budget doesn't work for me. I'm just gonna think about saving money here and there,’” Chellani said. “So you need to make something that really works for you and that you can do the whole year.”

Sticking to Your Budget

Create a financial goal by deciding how much to spend in a week or a month. 

“Have a strong willpower to honor that number and to always stay on track,” said Gregory Pilla, a financial advisor at Edward Jones. 

Create a routine to manage your budget. Download budgeting apps like Mint or NerdWallet to check and record your finances.

“You wanna create a plan and stick to that plan and say, ‘One month from now, after putting the numbers in this spreadsheet one month from now, I'm gonna go back and see if my numbers are close to these numbers,’” Chellani said. “You can't stick to something unless you see your progress and see where your money has gone in that time period.”

Setting boundaries with your funds can help stick to your budget. Whether that is saying no to going out or bringing a bagged lunch to work. 

Having a budget is important because you work hard for your money – take control of where it goes. 

Follow your budget because you do not want to live in debt or borrow money, Tran said. 

The goal of budgeting is to have money set aside. 

“It's not about how much you make. It's how much you can save and budgeting allows you to figure out how much you can save,” Chellani said. “Because if you're making $50,000 and you're saving 10,000, you're just as well off as someone that's making a hundred thousand dollars and also saving $10,000 a year, you guys are in the same place after one year.” 

Another part of personal finance is investing. Chellani’s spreadsheet has information about compound interest, and an investment stimulator to calculate how much money can grow over 40 years. Tran echoes the idea to invest your money.

Whether you should invest in a recession is up to you. Experts agree that investing during economic strife is a good idea because costs are lower, and investing is a waiting game. The right time to start investing is now because the economy will continue to grow.

“If you think that the economy's gonna be smaller than it is today, that's an insane way to think [about] it,” Chellani said. “You can almost guarantee that 40 years from today, the economy's definitely gonna be larger than it is today.”

Prices rose eight percent year-over-year in July because of inflation, requiring more spending. By investing, you make your money work for you as opposed to the other way around.

But investing is a different conversation. Establish budgeting habits first.

“Reevaluate your budget and stay disciplined,” Pilla said.

Top Takeaways 

How To Create A Basic Budget 

• Create a budget on paper or excel to see where your money is going. 
• Know the difference between your wants and needs.
• Be realistic when you allocate money to bills, indulgences and savings.
• Check it every month to assess. 
• Be disciplined.