Are you struggling to make ends meet? Living paycheck to paycheck? Are you getting by but finding yourself with little to no money left at the end of the month, with no savings? 

Maybe you’re making ends meet but you aren’t satisfied with the progress you’re making each month. Society considers all of these scenarios to be “normal,” so please don’t be discouraged. We’re here to help you break these societal norms and get you on your way to an early retirement!

Having a budget will restrict me from doing what I want.

WRONG – Budgeting gives you the flexibility to plan ahead for the things you want to have and activities you want to do. Because you planned ahead, you will be able to pay in CASH and have no guilt. It is actually very freeing.

Making a budget is difficult, and I don’t have the time.

WRONG – Once you have the correct tools, it is easy to set up a budget based on your income and spending. After your budget is set up, it will only take a few minutes to make minor adjustments on a month-to-month basis.

Budgeting is checking to see what I spent at the end of the month.

WRONG- Budgeting is spending based on how much money you bring in. You can’t spend or save more than you make. Looking at how much you spent at the end of the month can be a sure way to put yourself in a bind if you didn’t have a plan.

How can you break these societal norms?  By understanding how to effectively budget our money.  Budgeting involves making a monthly plan for your money.  It shows how much money is coming in, going out, and how much you are saving.  If you’re doing it right, hopefully, your balance is zero at the end of the month and you’re not overspending.

Budgeting can be an overwhelming word.  It can summon fear and anxiety for many reasons. Such as, being unfamiliar with how to go about it, or being uneasy about analyzing spending habits.  However, on the journey to FIRE, it is an important first step to taking over your financial future.  This exercise will help you to work toward your financial and personal goals.

On this page, we are going to debunk the myths surrounding your monthly financial plan. Consider this a clear guide for implementing budgeting into your life. We’ll help you make your own budget so that you can fully understand where your money is going each and every month.  Once you get started and see how easy managing your money is, you’ll never go back.

What Am I Budgeting For?

Budgeting is an important part of the FIRE journey because it is a means toward reaching a goal.  Whatever that goal is, seeing where your money is going each month will definitely help you get there.

There are many goals that budgeting can help with, such as:

  • Financial stability
  • Emergency funds
  • Debt payoff
  • Retirement savings
  • House downpayment
  • Education savings
  • Car savings
  • Traveling
  • Items that are important to you

Understanding The Budgeting Process

 Let’s get started!
  1. Make a commitment between you and your spouse, if applicable, to stick to your new monthly budget.
  2. Calculate your take-home income.
  3. Set your goals and prioritize them.
  4. Determine your spending categories and how much money you spend on them.
  5. Make sure your budget equals 0!
  6. Income – Expenses and Savings = 0.
  7. Review and adjust throughout the month, as needed.
  8. Repeat each month.

We are going to walk you through the budgeting process step-by-step with examples.

> First, download our Budget Worksheets and follow along with the steps below.

> Then, download our How To FIRE Budget Template to create your own budget!

Please note: The template has pre-filled categories and equations.  As you add income, expenses, and savings, the totals will adjust.  Feel free to replace the pre-filled categories with ones that fit your lifestyle and needs. You can even add additional rows to a category.

Analyze Your Income

The first step requires you to consider how much money you bring home every month from each income source. In other words, add up your paycheck amounts for each job. In the Net Income section at the top of the spreadsheet, enter your income for each month by the source. Example:
Income 1: Company A – $4,500

Income 2: Company B – $2,000

Side Hustles: $500

Variable Income Earners

Budgeting with a variable income can sometimes be frustrating.  We personally budgeted with a variable income for a few years.  It takes some practice, but after a few months you will get the hang of it.

Rather than guessing what your next month’s income will be, take your lowest pay from the previous six months and use that number as if it is a fixed income.  Budgeting with our lowest month’s income worked best for us.  This allowed us to never run short, and any additional income we adjusted the budget for.

In our case, this resulted in more savings!  That being said, if paying off debt is one of your goals, you can allocate the extra cash accordingly.

Analyze Your Spending

What do you spend your money on?

The second step involves thinking about what you spend your money on every month.  As you can see in the template, there are many different categories. We’ve listed groceries, gas, utilities and your mortgage, to name a few.  These are all expenses that you should include in your budget and subtract from your net income.

In the template you will also find many different line items for potential expenses. Is anything missing?  Feel free to add any additional items to the budget. Likewise, feel free to delete any rows that do not apply to you.

How much do I spend on each of these categories?

Next, fill in the amount you will spend in each category in the appropriate cell of the template. Please note, anytime “0” is entered, or the balance becomes “0” it will be illustrated as “-“.  So, if the balance of your budget says “-” you are spot on!


Electric: $170

Water: $55

Sewer: $70

Cable/Internet $130

You will notice that as you add expense and savings amounts to each category, it will subtract them from your net income and give you a ‘balance’.  The goal is to attain a zero-based budget.

Income = Expenses + Savings

You cannot spend or save more than you earn.  

So, let’s say that your household brings in $4,000 per month.  The totality of your expenses and savings should also be $4,000 per month.  The ‘balance’ at the end of the month should be zero.

What about expenses I don't pay every month?

You may have expenses, like car insurance or life insurance, that you pay on an infrequent basis (bi-annually, quarterly, etc).  You should still include these expenses in your monthly budget. You should calculate how much this expense costs you on a monthly basis and set that amount aside in a different account.  These accounts are called sinking funds.  When the bill is due, you will be able to pay it in cash.


The Smiths pay $1,500 for car insurance bi-annually.

$1500 / 6 months = $250 / month

The Smiths should be budgeting $250 per month for car insurance and setting it aside ensuring they have the cash to pay the bill once it’s due.

Below is a guideline detailing how to allocate your monthly expenses and savings. Each situation will vary, so don’t worry if they don’t match up exactly as shown.

Budget Category Breakdown

Budgeting Resources

There are many different options for creating a budget. Many people choose to use programs that can track spending from their checking accounts and/or their credit cards.  Once a transaction is posted, they can drop it into a category.  This allows them to see how much they have spent so far in a category, and how much they have left to spend from their budget.

Here are a few budgeting tools available to choose from:

More Budgeting Tips

  • It is important to be on the same page with your spouse/significant other.  Make sure that the budget is something you do together, and all parties agree on it.  Budgeting will not work if all parties are not keeping to the plan.
  • We suggest sitting down to work on the monthly budget once, before the month begins.  As you progress through the month, review your transactions to ensure that you are sticking to your set allocations. If necessary, make changes if all parties agree.
  • It is important to be able to cover an emergency, if necessary.  You may choose to allocate some of your income towards an EF every month.
  • As mentioned in Step Two, remember to create a line item for any sinking funds you have.  It is a good idea to set this money aside every month in a different account until that bill is due.  This way, you are prepared to cover that bill in full with cash.
  • At month end, you can analyze where you spent your money.  This will help you decide if there is any particular category in which you need to cut down spending.  Alternatively, it will help you know if you need to allocate additional funds toward a particular category on a monthly basis.
  • Be forgiving and patient!  Budgeting takes a few months to perfect.  Don’t be discouraged if you feel like this process is mostly trial and error at first. You will get it!

Still Having Difficulty With Your Budget?

Budgeting is difficult!  There are many reasons why someone may struggle with the concept and execution. If this is your first time budgeting, you will have to get used to it. Allow yourself time to adjust to this new way of life.  Once you get the hang of it, you’ll never want to go back!

As we mentioned, there are many misconceptions associated with budgeting. These can bring up negative emotions. Remember that budgeting does not restrict you.  It enables you to do the things you want to do and spend your money on whatever you want or need to.  It can be hard to not have as much flexibility to buy things spontaneously. Just remember the goals you set for yourself and plan for fun things in your budget every month.

If you find the process of setting up a budget overwhelming, take it step-by-step.  Break everything down into sections (income, categories, amounts).  If you set it up in our How To FIRE Budget Template, you can use that data every month moving forward.  Fixed expenses and sinking funds won’t change from month to month, so it is very likely that you will only have a few category amounts to adjust every month.  This brings your initial set up time for month 1 down to only a few minutes each month afterward!

Another aspect that can make budgeting difficult is if unexpected expenses come up.  Life happens. It is inevitable that an emergency or an unexpected expense will need to be addressed at some point, no matter how much you plan.  This is why it is important to make yourself a priority.  Pay yourself first and put money away in an emergency fund.  This will give you peace of mind, and allow your monthly budget to stay intact.

You can overcome these difficulties with practice, patience, determination, and discipline.