Simple Budgeting: The Easy 8 Step Process

The budgeting process creates the financial roadmap for each individual. If done properly, budgeting can help individuals achieve Financial Freedom much more quickly than they could without having a budget in place. I wrote Simple Budgeting: The Minimalist Guide to Setting Up Your First Budget for those individuals looking to improve their financial situation through the budgeting process.

Today we’ll go over the 8 step budgeting process presented in Simple Budgeting and provide some information to get you started on your financial roadmap today!

After countless hours and cups of coffee, Simple Budgeting is now available for purchase!

Top 3 Reasons To Create A Budget

Why is budgeting so vitally important? Below are the top 3 reasons why everyone needs to create and maintain a solid budgeting process.

#1 – Budgeting is the Financial Roadmap

First and foremost, creating a budget allows you to develop the financial roadmap on which your life will travel.

Think of it as similar to setting your goals. If you set great goals, put them down on paper, and review them every day, the chance that you will achieve those goals is very high.

In contrast, someone who is vaguely aware of what they want but never really commits to those goals by putting them on paper, oftentimes ‘drifts’ and doesn’t really achieve what they set out to do. They may still have a decent life, but it won’t really be the life they truly wanted.

The same thing goes with our finances; if we lack focus and direction on where we want to go, more often than not we’ll manifest that in our life.

A budget can change all of this. It can help one realize:

  • How much income they need to cover all of their expenses in life
  • How much they need to achieve a desired savings rating, which will eventually lead to early retirement
  • How well they are tracking against their predicted income/expenses
  • Are you achieving your financial dreams and desires, and if not, what is the reasoning?

I attribute the budgeting processing as the main reason why I am 35 and Financially Independent. If I needed to, I could take many years off from the workforce because I have enough cash on hand to cover life’s expenses.

I do not say this to brag or boast but merely to reiterate that creating a budget and knowing my financial goals lead me on the path toward Financial Freedom! And it can do the same for you too!

#2 – It Helps You Better Plan Purchases

I have found that in creating a budget, I no longer fret about where money is going to come from. It’s not that the act of creating a budget gives me money, but rather that in creating a budget, I am more knowledgeable about where my money is going.

This allows me to utilize my earnings in a much better fashion than if I were to willy-nilly spend it on whatever my heart desired.

This isn’t to say I’m a miser; in fact, I would say that it has had the opposite effect on me now. Instead of wondering if I can buy a meal for a friend on their birthday or for my family on a night out, I’m confident that if I drop $100 on that meal, it is money well spent (and within the budget).

Specifically, I have found that creating a personal balance sheet has provided immeasurable benefit to my overall financial situation.

In a nutshell, a balance sheet is a snapshot of where one stands from a financial perspective at any one point in time. It’s not an ongoing record like an income statement, but rather provides a glimpse on any certain day.

Think of a balance sheet as a picture taken in time. The numbers are the picture – the point saved in financial memory.

By creating this document, I have been able to know exactly where I am at any given time period. I have a ‘picture’ that I am able to look back on to remember exactly where I was and project where I am going.

This helps in the following scenario:

  • Assume I have a $10,000 purchase to make with $600 per month payments.
  • In looking at my balance sheet, I have $10,000 in cash and $6,000 in current liabilities.
  • I couldn’t’ make this purchase without borrowing, but I would be able to afford the monthly payments.
  • I then have three main options: 1. Borrow to pay in full 2. Wait until I have the cash 3. Take on the monthly with a small downpayment.

I have found that for me, this exercise in creating a balance sheet has greatly improved my ability to plan out and anticipate purchases, which has brought a massive reduction in stress to my life.

#3 – Money is No Longer a Mystery

Last but not least, setting up a good budget has helped me to understand and appreciate money.

During the course of my 15+ years of active budgeting and financial experience, I have come to learn more and more about what goes into creating a budget, how to better money by creating a savings web, and how to have my money working for me.

I didn’t know all this when I started out, but by adopting the “brick-by-brick” mindset, in which I aimed to learn a little bit each day, I soon found that my financial acumen had increased tenfold.

By attaining more knowledge, I have been a better money manager, a better investor, and have been on the path towards Financial Freedom.

In creating your own personal budget, you will come to find that you will also begin to master the concept of money and that your financial situation will go to a whole, new level!

Be sure to check our newest Youtube video, the 4 sections of a great budget! In it, I detail what items make up an indispensable budget.

The 8 Step Budgeting Process

Without further ado, we will now go over the 8 step budgeting process. This is presented in much more detail in Simple Budgeting, so be sure to pick up your copy today to understand more about the budgeting process!

Step #1 – Understand Basic Financial Concepts

A basic understanding of financial concepts is the first step to a proper budget. Though some of us are more inclined towards numbers than others, we do not have to make this process more complicated than it is.

The goal is for you to have a starting point as to what makes a good budget. By studying financial sites like, Investopedia, FinViz, etc., you will soon find that your financial acumen has improved exponentially and that you are becoming a master of money!

Step #2 – Find a Program that Works for You

Finding a program that works for you is one of the most important steps to setting up and maintaining a solid budget. There are seemingly millions of programs out there: QuickBooks, Mint, Excel, and more! Which one to choose?

I have personally used Excel for most of my life, but I have recently switched over to Google Sheets to manage my budget. I like that Google provides great products at good price points (usually free!). Google also allows me to sync seamlessly across all my devices via cloud storage.

While I maintain my budgeting in Google at the present time, you do not have to do so. Find a program that works for you and get started today!

Step #3 – Find a System that Works for You

Finding a system that works for you is similar to finding a program that fits your needs. In this step, your goal is to find a routine manner in how and when you maintain your budget.

Personally, I have one day a week where I sit down for 30 minutes, input my numbers into a spreadsheet, and have everything updates and ready for the week ahead. I call this my “Budget Day”.

During my “Budget Day”, I will go through and update my expenses, income, assets, and liabilities, as well as pay down or account for bills coming due in the next week or two. This helps me maintain serenity in my financial life, as I am always on top of expenses as they come due, and I always know my financial condition.

Step #4 – Create Your Checkbook Register and Input Numbers

In creating your checkbook register, the goal is not necessarily to make sure the bank’s numbers match your own. This used to be more important back in the days of paper ledgers and flawed computer systems. But most banks today are high-tech enough where they would rarely make mistakes (though it is still a good practice to ensure numbers match).

Rather, the main goal in creating this checkbook register is to anticipate money coming in and out of a checking account in order to maximize savings and minimizing fees.

We do this by knowing our current account balance and having the cash inflows and outflows laid out for the next few weeks ahead.

Step #5 – Create a Predicted Budget Template and Input Numbers

In creating your predicted budget, you are beginning the process of dealing with projected numbers and cash outlays. The goal is to figure out your total income, total expenses, and ideal savings rate.

Use round numbers and good estimates here (don’t worry about being exact unless you are an accountant that loves that stuff). If you are within a certain percentage of reality, you have done your part.

You can use the predicted budget as a good test run to change numbers around to find a better savings rate. Ask yourself, “what happens if I reduce this expense or start making this income?” It is from this point that you can start seeing the magic of practicing The Rules of Money.

A few more things to keep in mind when setting up your predicted budget:

  • Remain conservative. It will be better to find that you underestimated income and overestimated expenses rather than the other way around.
  • Budget a profit. If you are finding that your expenses exceed your income, then it is time to change some numbers around. Can you decrease your entertainment expense? Not eat out as much? Or perhaps increase your income through a side hustle? You have some leeway here — remember to maintain creativity and you will find a way to get the profitability you seek.
  • Be realistic. You want to make sure that what you are estimating is close to reality. If you are finding that your numbers are off, adjust your predicted budget to more adequately reflect the truth.
  • Pay yourself first. Notice how “savings” and “early house payoff” are included in necessity expenses? That is because we need to change how we view these important vehicles. Paying yourself first, above and beyond everyday expense, will put you on the path towards true Financial Freedom. Make sure to budget for it!

Step #6 – Create an Income Statement Template and Input Numbers

By creating an income statement, your goal is to create a simplistic spreadsheet that can track the ultimate tell-all: profit and loss.

The income statement is the place where you will enter in both your true income and expenses to arrive at your actual profit. This entry will be done in your Budget Day (discussed above).

The goal is to run at a profit and not a loss, though the way we incur expenses, we may occasionally run at a loss if we have a large, unexpected expense. So long as we run at a profit more often than we run at a loss, everything should be good.

Step #7 – Create a Balance Sheet Template and Input Numbers

Creating a balance sheet is what I consider to be the most important piece of your budget. The balance sheet will be the document that tells you whether or not you can afford that purchase and where you stand in your current financial position. It is a “one-stop shop” that shows your complete financial picture as a snapshot in time.

The Balance Sheet will be where you track your assets and liabilties to arrive at your net worth.

Step #8 – Add in Ratios and Calculations

Now that you have a working balance sheet, your next objective is to input various ratios into your balance sheet to better understand your overall financial picture.

Some ratios that I recommend calculating are:

  • Overall cash position – a sum formula on all the cash-like holdings (the items that are easily liquidated)
  • Cash position less current liabilities – Cash position less current liabilities
  • Working capital – Current assets less current liabilities
  • Current ratio – Current assets divided by current liabilities
  • Quick ratio – (Current assets less inventory) divided by current liabilities
  • Debt ratio – Total debt divided by total assets
  • Overall net worth – Total assets minus total liabilities


There you have it! The top 3 reasons to budget along with a summary of the 8 step budgeting process.

Keep in mind that for the price of a coffee, you can own Simple Budgeting today, which will take you through an in-depth budget setting process!

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FAQs on Simple Budgeting

I am excited to be presenting this work for you, my readers.  The exact title is Simple Budgeting: A Minimalist Guide to Setting Up Your First Budget. I wrote it for all those people out there wanting to set up their budget but with little-no idea where to start.

My hope is that I can share my knowledge, help you improve your own, and as a result, make this world a better place for all of us.

Here are some FAQs I have received regarding Simple Budgeting:

Why did I write this book?

I consider budgeting to be the most foundational skill that any would-be investor can develop.  Without this key concept mastered, any future endeavor into the world of investing or business is most likely doomed to failure.  Therefore, before I begin teaching the world dividend investing, I wanted the foundation piece – simple budgeting – to be written first.

Who should buy this book?

Well, you for starters!  I wrote this book for anyone looking to set up their budget process or improve their existing methodology.  Even if you are a veteran of the budgeting process, you could also learn a thing or two via the concept of financial minimalism expressed in this book.

Why incorporate minimalism?

I am a firm believer in simplicity.  My main goal is to achieve a calm, serene outlook, and I have found the best way to do this is to simplify as much as I possibly can.  I adopted minimalism while in college and its discipline has guided me ever since.  This principle has applied not only to my personal life, but my finances as well.

Thank you!

Thank you for being a reader and patron of  Upward and Onward towards Financial Freedom!

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