ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Budgeting 101: How to Create a Workable Budget

Updated on June 25, 2013

Budgeting is not easy, its not fun. That is why so many people have such problems with it. As for explaining what budget plan works best for you, it is impossible. As everyone's financial position is different - no two people are fiscally the same - You need to examine a few plans, the pros and cons of each and decide for yourself which works best for you. One that I find works for most is the 50/30/20 plan.

The 50/30/20 plan

Harvard Bankruptcy Professor, and author of "All your worth: The Ultimate Lifetime Money Plan," Elizabeth Warren, has been developing budgets for a long time. In her book she describes a plan she calls the 50/30/20.

You start with your total take-home pay each month - your pay after taxes and all deductions.

Your goal is to reduce your must-have expenses to 50% of your income. This would be any payments you are contractually obligated to (Mortgages, any loans, credit card minimums,) any bills, etc.

The next 30% will be your wants. For example, vacations, nights out to dinner with your significant other, toys for your tots, that new laptop you've had your eye on, etc. Keep in mind some of your needs may overlap into wants - think long distance phone calls, etc.

And the final 20% would be extraneous money for debt repayment and savings. This is money that you may either sub-budget towards a savings account, possibly even investments, and paying down your current debts a bit to make things in the future a little more smooth.

What I like most about this plan is that it could potentially work for anybody, provided you can get your expenses to the levels needed. Its tough, and I know people with their needs column in the 90th percentile of their earnings - I told you budgeting is hard!

How to create your own budget

So you don't want to use the 50/30/20? That's alright, we can find something that will work better for you. Here are some steps to take toward creating that budget.

To start, gather every single financial document you have, and find a nice comfortable spot to sit for a while. This includes everything from all of your bills to all of your pay stubs. Be thorough.

Go through your documents and list all your sources and amounts of monthly income, then do the same for your monthly expenses.

Now split all your expenses into two categories - Fixed and Variable. A good example of a fixed expense would be your rent, which will always be X dollars every month. Whereas a variable will be more dynamic maybe gas or food - it could be 200 dollars this month but only 120 dollars next month.

Now create a total for all columns. If your income is higher than your expenses, you're already off to a good start. Now you see where you can place more money. Maybe you want to pay down your credit cards a little more each month, or add a little to your savings funds - Great!

Track your spending. You won't be able to sit down and examine when you never recorded to begin with. Bank statements are great for this, but they can only track what you spent using your account - they can't track what you spent in cash after it left the ATM. Banks provide a registry with their check books, you can use it for more than just checking records.

Be sure to review your budget monthly and know what you can spend and where. The entire purpose of a budget is to plan your spending to help you spend more wisely - if you don't work hard to stay on the budget, why did you create it in the first place?


    0 of 8192 characters used
    Post Comment

    No comments yet.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)