A Simple, Back-of-the-Envelope Budget (That Actually Works)

Before apps, rules, or categories, budgeting starts with one thing: clarity. You don’t need perfect numbers or fancy software. You just need a blank spreadsheet and an honest look at your cash flow.

This is a quick, back-of-the-envelope approach you can build in Excel or Google Sheets in 15–30 minutes, then refine month to month. It’s not about perfection — it’s about building a clear baseline you can improve over time.

Step 1: Start With Monthly Post-Tax Income

The first number you write down is your monthly take-home pay — the amount deposited into your checking account after taxes, deductions, and contributions.

If you’re salaried, this is easy: it’s generally the same every month.

If you’re hourly or commission-based, look back 3–6 months at your direct deposits or checks and calculate a monthly average.

Step 2: List Fixed Expenses

Next, write down your fixed expenses — costs that don’t change much month to month (rent or mortgage, utilities, insurance, phone, internet, subscriptions, etc.). Break all expenses into detailed line items. So for utilities, list out relevant utilities – electric, gas, water, trash, etc. For subscriptions – list as separate line items as well.

Label each item in one column and list the monthly amount next to it. Don’t overthink it — round slightly up if needed. You can refine exact amounts later.

Step 3: Add Variable Expenses

Now list your variable expenses, where spending tends to fluctuate, such as groceries, dining out, gas/transportation, shopping, entertainment, travel, and so on.

For now, quickly estimate these expenses — round to a reasonable number. We’ll refine them shortly.

Step 4: Do the Math

Add up your fixed and variable expenses and label the total as Total Expenses. Then subtract:

Monthly Income – Total Expenses = Net Income

This is your starting point. Don’t react yet — we’re not done.

Step 5: Refine Variable Expenses

Now let’s make those variable numbers more realistic:

• Groceries: Estimate what you spend per day, then multiply by 30

• Gas: Estimate weekly, then multiply by 4

• Dining out, shopping, entertainment: Same idea — think through and convert to monthly estimates

Congratulations — at this point, you’ve built your first working budget.

The Refining Phase (Where Real Change Happens)

If your Net Income is negative, that’s your wake-up call. You can’t run negative cash flow month after month — but the fix is usually simpler than people think.

Hard Fixed vs. Soft Fixed Expenses

Some fixed expenses are truly “hard” to change — rent, insurance, internet. These often require major life decisions. Others are soft fixed expenses, such as streaming services, gym memberships, and app subscriptions.

This is where small choices add up. Five streaming services can become three. A gym you barely use can be downgraded or canceled. These cuts don’t feel painful, but they create breathing room.

Variable Expenses: Small Tweaks, Big Impact

This is where budgeting really works. If you spend $40 a day on groceries and cut it to $30, that’s $300 a month saved — without eliminating food or joy. You don’t need perfection. One expensive day can be offset by a cheaper one. The key is awareness.

For a few months, keep a light mental tab on spending. Eventually, this becomes automatic. You stop thinking in terms of restriction and start thinking in terms of balance. That’s when budgeting shifts from work to habit.

Why This Approach Works

By now, you’re not guessing — you’re seeing your money clearly. This method isn’t about control. It’s about visibility. Once you see your numbers laid out simply, better decisions tend to follow naturally.

If you use a credit card, review a few monthly statements to better understand spending habits. This helps you refine estimates and uncover expenses you may have forgotten — giving you a complete picture.

And here’s the surprising part: when done this way, you can predict — with scary accuracy — how much you’ll save 6, 12, even 24 months out.

Not because you’re strict.

But because you’re intentional.

That’s the psychology of budgeting done right.

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