The Basic Formula to Budgeting and Why You Should Stick to It


Budgeting can seem stressful. It can seem complicated, overwhelming, challenging and, quite frankly, just a pain. It could be that people think budgeting involves tedious spreadsheets and advanced mathematical equations, but the truth is, the formula for budgeting is really quite simple.

In its simplest form, the basic budget is your income minus your expenses. The difference is what you can spend on everything else. But there’s no one-size-fits-all method when it comes to budgeting, so we asked three experts from account management service to weigh in on what works for them.

How do you budget?

Sarah Caron, Founder of

    “I don’t currently keep a budget for expenses — however, I do have an income goal that I strive to hit monthly. As a freelance writer, it’s important that I am constantly vigilant about having enough funds coming in. I factor in my expenses, along with projections for incidentals and tax payments.”

Kimberly Rotter, Manilla’s Personal Finance Expert and Credit Sesame Expert

    “I cannot manage my finances without a budget. I keep an Excel spreadsheet listing all of our average household monthly expenses. My husband and I each contribute to a joint account from which we pay for all of those household expenses (most of this automated). Anything not on the list of agreed joint expenses is paid for from our individual accounts.”

Teresa Mears, Editor-in-Chief of Living on the Cheap

    “I keep a general budget in my head, and I track my spending using Quicken. I charge everything I can on American Express and pay it off at the end of the month. Rather than create a budget with categories, I keep an eye on the big items to make sure my outgo is in line with my income. I find it more important to keep an eye on recurring expenses rather than worry about exactly how much I’m spending at the grocery store this week.”

When did you start budgeting?

Sarah Caron

    “My income goal budgeting began in late 2012. I’ve honed the process since then so that I have an accurate representation of what’s coming in and being earned at all times.”

Kimberly Rotter

    “When I was in college, I spent all the money in my pocket. As a result, I fell into credit card debt. When I got out of debt, I began to track my money carefully in order to see exactly where it was going. Now that I have a family and I share a bank account with my husband, it’s important for us to be accountable to each other and to have a clear understanding of how our money is spent.”

Teresa Mears

    “I have been supporting myself since I was 18, and if my expenses exceeded my income, I was in trouble, because there was no one to bail me out. Back when I was 18, college students couldn’t get credit cards so there was no temptation.”

How has this method or formula improved your life?

Sarah Caron

    “It has helped me better track and prepare for income variations — also, overall I have tripled revenue in some categories simply by paying close attention to it and making adjustments to earn more.”

Kimberly Rotter

    “Discussing money frequently and tracking where it goes allows us to see what we can afford and what we need to do to reach goals. When it comes to splurging on an item one of us wants, my husband and I can each spend freely whatever we think we can afford because the money comes out of our personal slush funds.”

Teresa Mears

    “Life is always more tranquil when you’re living within your means and don’t have to worry about paying your bills. I don’t want to have to agonize over whether I can afford a glass of wine when I go out to dinner.”

Any other advice for Fat Wallet readers?

Sarah Caron

    “Don’t wait to start tracking your income, and don’t ignore your expenses.”

Kimberly Rotter

      “If you’re just

starting out with a budget

    , use a debit card for everything because you can easily track your spending without having to take notes or keep receipts. You have to know where you spend your money before you can make any changes. Once you make a savings goal, make the contributions automatic.”

Teresa Mears

    “Know where your money is going. You can’t solve a problem until you know what it is. Analyze what you’re spending your money on and whether all those expenses are worth it. Maybe you need a cheaper place to live. Maybe you need to eat out less. Maybe you need to give up shopping every weekend. Maybe you need to travel less. If anybody really spends $4 a day on coffee, maybe you need to decide if that really is worth $80 a month to you.”

Sarah Kaufman is the editor-in-chief of advice site The Manilla Folder at, the leading, free and secure service that helps consumers simplify and organize all of their bills and household accounts in one place online or via the 4+ star customer-rated mobile apps. Sarah is also a regular contributor to Yahoo! Finance, Good Housekeeping, Woman’s Day, Redbook, The Motley Fool, and other sites.

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