5 Simple Steps To Create A Budget As A Lifestyle

Having a thick wallet at the end of the month feels great. Unless you see more crumpled receipts in it than enough $10 notes to last you through the month. 

That’ll be enough to trigger a gush of adrenaline rush. Perhaps more so after the Starbucks coffee you just bought impulsively

In times like this, it’s typical of us to pick up the mantra “I need to save money” or “I need to create a budget”.

You feel motivated to create a budget and start saving a ton. But here’s the problem, how do you make a budget? And more importantly, how do you stick to it? 

Maybe you’ve tried the 50/30/20 budgeting template but couldn’t keep at it after a while. Well, if that doesn’t fit you, it’s completely normal. After all, a template wouldn’t work 99% of the time without personalization and there isn’t a point to force yourself into a system because it works for someone else. Everyone has a different lifestyle and that includes you. The most important point is to get something that works for you so you get better every day. 

If you’re just starting out on creating a budget, this post will guide you through the simple steps of creating one. 

A budget helps you plan your spending so you have enough money for your needs, wants, future, and some fun!

And if you were to put it into an equation, budgeting looks like this:

Net income – Expenses = X 

And your goal is to make sure the value of X is not a negative number. 

Why do you need a budget?

First, let’s have a look at an example of a budget: 

  • Net salary: $2000 (After-tax)
  • Food: $300
  • Transport: $500
  • Student Loan: $400
  • House rent: $1300
  • Balance: -$500

Sounds wrong huh?

While it certainly isn’t a good example, it illustrates the importance of creating a good budget. 

A negative sign in your budget could indicate the start of your nightmare. Because chances are, you’ll use your credit card to cover that negative amount. 

And if you don’t pay that balance on time, you will have to pay extra for the interest rate in addition to what you owe. For example, with a 12% APR credit card, you’ll have to pay an extra $60 interest on top of the $500 that you owe ($560).

Though I like to keep things light, the wallet is one thing I’d love to remain heavy—not with receipts of course.

Thankfully, here’s where the “right” budget can save us.

Somehow, our emotions see “budget” and “diet” the same way—a restriction. The connotation is abstinence, misery, and agony from depriving yourself of spending. 

In other words, the budget equation often looks like this: 

Net income + No Spending = X

Setting a budget is really just a practice of conscious spending. It means to lay out a plan to allocate how much you want to spend on what so you can ensure that you are living within your means. Like how you plan a schedule for your daily activities to improve productivity. 

In the case of weight loss, it’s easy to get ambitious and starve yourself just to see your weight dive down in 2-3 days. But most likely, you’ll get tired of it soon and start binge eating after that. This eventually backfires and you might end up weighing more than before. 

The same goes for spending and budgeting. If you restrict your spendings too much, you’d end up giving up and overspending in the short term.

Creating Your Own Budget

Let’s get into the details on how to create a budget that works for you. Because budgeting often sounds boring, let’s make it “less boring” with a case study of our imaginary friend, Mr. Luxury.

Mr. Luxury has a net income of $2000 a month. He buys a $4 coffee from Starbucks 5 times a week, spends $500 dining out for convenience sake, lives alone in a spacious house that rents at $1100 per month, and spends $100 on utilities and $215 for transportation. At the end of each month, he’s left with nothing to save. 

Mr. Luxury did not save any money and is at risk of getting into credit debts if his house just decided to break something that requires a $300 repair fee. 

For now, his financial goal is to start and have $1000 saved up in an emergency fund within 3 months. So let’s go through the steps of creating a budget for him. 

5 Simple steps to create a budget

Examine your lifestyle

If you want to create a budget that suits your lifestyle and that you’ll stick with in the long run, you’ll have to look at your current and past spendings. Do you buy Starbucks coffee every weekday? Have a gym membership? How often do you dine out or spend on entertainment? 

Mr. Luxury spends on Starbucks coffee 5 times a week which amounts to approximately $85 a month, $500 dining out for convenience sake, $100 for utilities, 55% of his net income on his house rental, about 11% on transportation, and has nothing left to save.  

Identify Your Priorities

Why do you want to make a budget? Are you trying to increase your savings rate? Want to pay off your debts soon? Trying to commit to investing? Or maybe you’re trying to save money to splurge on your trip to Gold Coast? Get clear of what you’re trying to achieve from this budget. Start setting your financial goals if you don’t already have one. 

For now, Mr. Luxury would like to save money and start an emergency fund. So his main priority will be to create an emergency fund and start saving money in it. 

Estimate And List Down Your Expenses

What are your monthly expenses? List them all down. If you use a credit or a debit card, you can easily look at the past statements of your spendings. But if you’re a cash user and didn’t keep track of your spendings, just estimate as accurately as possible.

For Mr. Luxury, it’ll look like that:


  1. House rent – $1100 (55%)
  2. Dining out – $500 (25%)
  3. Utilities – $100 (5%)
  4. Starbucks – $85 (4.25%)
  5. Transportation – $215 (10.75%)

Categorize your income and expenses


As Mr. Luxury is not doing any side hustles, his net income is $2000 which is his sole income.


There are three main categories for expenses. You may also find other categories on other blogs. But for now, we’ll keep it simple and stick to the three basic ones. 

  • Fixed Expenses—any expenses that have a fixed amount and must be paid every month like house rentals, loans, insurance, etc. 

  • Variable Expenses—Any expenses that are necessary but can be reduced (eg. food, utilities, medical, etc.)

  • Discretionary Expenses—Any expenses that are not necessary and can be totally cut off (eg. dining out, fun money, entertainment, personal care, etc)

For now, it’ll look like this: 


Adjust According To Priorities

Mr. Luxury’s goal is to have $1000 saved up in his emergency fund within 3 months, we’ll need to prioritize savings and add that into a category. 

To do that, he will need to save at least $334 per month. 


Well, we’re seeing a deficit here and we don’t want to get into credit debts. We’ll have to reduce spendings. To do that, we’ll first look into the expenses that can be totally cut off which is the discretionary expenses.

The expenses in this category are Starbucks coffee and dining out. 

But remember we’re talking about budgeting as a lifestyle? We don’t want to cut off his discretionary spending completely. 

So Mr. Luxury will have to compromise by reducing the frequency of dining outs and buying Starbucks coffee perhaps 2-3 times a week instead of 5.

And with Laura Barrett’s cookbook where every recipe costs about $2 per servings, Mr. Luxury can easily learn to prepare his own meals and slash his food bill.


Assuming he’s now spending $250 on food and occasional dine outs, we now have a deficit of $39. 

And now that we’re done with discretionary expenses, we’ll move on to see if there’s anything we can reduce from variable expenses

If he’s able to find cheaper alternatives to reduce his cost of transportation to at least $176, his budget will then look like this: 


So now his budget is all set and if he sticks to his budget, he’ll have achieved his financial goal of having a $1000 emergency fund within 3 months. By then, he’ll want to create a new budget based on his next financial goals. 

“But wait, what if Mr. Luxury couldn’t cut down his transportation or any other expenses and his balance is still negative, what can he do?” 

If it’s not practical to reduce his expenses in any part, he can consider some of the options like:

Further reducing or cutting off his discretionary spending

As his main goal now is to have $1000 saved up in his emergency fund, it’ll be worth sacrificing them for a short 3 months so he won’t be at risk of getting into a spiral of debts that may cost him years away from achieving financial freedom

Reduce the cost of his home rent

With his current home rent taking up 55% of his net income which is higher than the recommended percentage of 25-35%, he might want to try looking for a cheaper home instead.

Increase his income

He can consider doing side hustles like teaching English or even start a blog and grow a side business. Additionally, here are 25 ways to make money online ranging from surveys, investing, selling your skills, and even from losing weight, if that is one of your goals!


And there you have it, a guide to creating your own budget.

To wrap it up, here are the 5 simple steps to making a budget that fits your lifestyle:

  1. Examine your lifestyle
  2. Identify your priorities/goals
  3. List down/estimate your expenses
  4. Categorize your income and expenses
  5. Adjust according to your priorities. Start reducing from discretionary expenses, then move on to variables expenses, and finally, fixed variables. 
  6. If it is not possible, you may want to increase your income by doing side hustles. 

If you find it difficult to reduce your expenses, go over the list and try asking yourself:

  1. Do I really need that item or experience?
  2. How will that item or experience benefit me in the long run? Do I have a valid reason to spend on it or was it just to make me feel better at the moment?
  3. Are there any better alternatives for it?

Now, the budget is oversimplified as it is mainly to give you an idea of how to create a budget based on your current lifestyle. 

Of course, you will have many more expenses like clothes, household items, insurance, debts, loans, etc. But when you know the basics of creating a budget, it’ll be easier to adjust your expenses accordingly. 

For low-income earners, creating a budget based on the percentage of your net income may not be practical. Therefore, it’ll be better to focus on your priorities when making a budget. 

And as your income increases, you’ll be more comfortable with creating a percentage-based budget. 

If you’d like, here’s a quick rundown of the recommended budget percentage: 

Expenses Percentage of your income (%)
Housing 25-35%
Insurance 10-20%
Food  10-15%
Transportation 10-15%
Utilities 5-10%
Savings  At least 10%
Fun/entertainment 5-10%
Clothing 5%
Personal 5-10%
Healthcare 10%
Gifting 10%

Final Thoughts

Having a budget is a practice of conscious spending. There are abundant budgeting types and financial apps out there. But what’s most important is to find the best budget system for yourself. 

And the best budget is not the one that helps you save and get rich quick. But rather, one that you can develop a habit from and let the compound effect bring you nearer to your financial goals. 

I know it can be tempting to go all out and try to achieve it in the short term. But it is better to go slowly but surely rather than quick but short-lived. And most importantly, to live below your means.

What does your budget look like and how do you stick to it? Let me know in the comment sections below

Share on facebook
Share on twitter
Share on linkedin
Share on pinterest

About Stephanie Jyet Quan Loo

Founder of stephaniejq.com, a science geek, sports freak, and polyglot. Loves food, books, and snow. Feel free to say hi! 

Leave a Comment

Your email address will not be published. Required fields are marked *