penny icon

how to budget (or not to)

Have you ever opened an Excel spreadsheet with the intention to jot down ALL your expenses, finally create a monthly budget to follow… only to get overwhelmed within 3 seconds of budgeting? 

We’ve been there! 

In this blog post we cover how to budget money the easy way: ditch the cumbersome task of counting pennies, focus on 5 key numbers, and make your budget work like magic. 

Hot Tip: budgeting is how you back into EVERYTHING. How much you have left over for your savings goals, homebuying prep, fun money. Always start here. We have a smart calculator in our Premium Membership to help you. Sign in or sign up.

👀 4min read

how to budget money

📸: Freepik

How to budget money: Remember 5 key numbers

Traditional budgeting tells you to calculate everything from $8 lattes to a $3 subway fee. No, no, no. 

Unless keeping track of every single cent in your wallet brings you immense joy, please do yourself (and your sanity) a favor:


What do you have to do to create a good budget? 

Remember these 5 key numbers: 

  1. take-home pay (aka income after taxes)
  2. must pay expenses (rent, car payments, etc.)
  3. any debt payments you must make
  4. your retirement contribution number
  5. = your budget number. AKA, your cash flow.

Your take-home pay – minus expenses, debt, and retirement contribution = YOUR BUDGET NUMBER. 

And THAT is the ONLY number you need to know to create a kick-ass monthly budget you’ll actually stick to! 

This is what we refer to as the Mini Budget Method. The goal of this approach is to make life easier for your brain, and more efficient for your wallet. Win-win!

Once you have your 5 key numbers, what happens? Math it out! 

Hot Tip: Once you get clear on your numbers, auto-pay and auto-transfer as much as you can! Automatic transfers are the easiest way to stay on track. 

How to create a good budget

Here’s how you apply the Mini Budget Method with the 5 key numbers described earlier. 

These are example numbers – fill yours in as we go!

  1. take home pay = if you earn about $3k a month, that’s $36k a year
  2. minus rent or mortgage = if you pay $1k a month, that’s $12k total
  3. minus food & must-pay expenses = say about $750, that’s $9k a year
  4. minus debt, savings, and/or retirement = maybe $650 total, that’s $7.8k a year
  5. what’s left? around $600 a month, or $7.2k a year

This means you have $7.2k a year leftover (or $600 a month) to spend, invest, or save for something big – like home, travel, etc. 

The $600 a month is your magic number. 

You know you’re in a good place financially, regardless of spending habits, as long as you spend less than $600 a month (or $7.2k a year). 

What about your life and money goals? 

Do you have an emergency savings? Saving for a down-payment on a house? A vacation?

If you haven’t subtracted it as a savings goal already, now is the time!

Subtract the money needed for your trip or down payment and adjust the extra monthly spending to accommodate your (new) monthly budget. 

Even if you don’t have enough, this exercise will help you make those big financial decisions with more ease and confidence.  

If you’re in the red… Don’t fret. 

You can choose an area to trim from, learn how to manage debt confidently with Penny, or find creative ways to make more money, so you can get your finances back on track.

Bottom line for a healthy budget

Instead of trying to memorize a bunch of different numbers you need for each spending category…

  • Learn your 5 key numbers. 
  • Work your way backwards. 
  • Decide on 1 monthly budget goal you’re going to stick to. 

…And voila! 

As long as your spending is less than that number, you’re golden! 

You’ll know intuitively that you’re hitting your financial goals and setting yourself up for success now and in the future.


At Penny Finance, our goal is to provide easy and digestible financial education for women – so you can increase cash flow today, and retire with wealth tomorrow. Click here to join or learn more

Start with the money maker quiz 

Have more questions about money or how to budget? Post a question on our community page

Want more money #inspo? Follow us on Insta @startwithapenny

Penny Finance may earn an affiliate commission if you purchase a partner product or service.

take me to penny