Your Guide to Creating a Frugal Budget

Spend Less, Save More, Pay Down Debt

••• Photo © Erin Huffstetler

A well-planned budget can help you to achieve your goals to spend less, pay down debt, and save more. Learn how to create your own budget that emphasizes frugal living with these tips. Expect to spend from one to three hours making this budget.

What You Need

  • List of your bills
  • Tally of your income
  • Calculator
  • Pen or pencil
  • Paper

Here's How 

  1. Assess your monthly expenses: Make a list of all of your , including any money that you spend on fun things like eating out, entertainment, and hobbies, and any minimum payments that you have to make toward your debts. You can use a budget form for this purpose if it makes the job easier.
  2. Total your earnings: Calculate how much you bring home after taxes and other paycheck deductions per month; also include any money that you receive from investments and other forms of residual income.
  1. Subtract expenses from earnings: Test out the effectiveness of your current spending habits by subtracting your monthly expenses from your earnings. This will show you how much you can expect to have left at the end of the month.
  2. Rework your budget: If your budget comes out on the negative side, rework it until your numbers crunch. To do this, go back over each expense and look for places to make cuts.
  3. Build in money for debt reduction: If you have debts, your budget should already include the minimum payments that you have to make each month. Now you need to find the money to pay down those debts. Look at your numbers again and determine where you are willing to make sacrifices to get out of debt.
  1. Build in your savings and investments: Now it’s time to budget money for your financial goals. Do you want an emergency fund? Retirement investments? Vacation savings? Make a list of what you hope to achieve. Then survey your budget once more to find the money that you need to reach those goals. If you have a lot of debt, you may need to skip this step for a while, and that’s OK-- should be priority one.
  2. Put your budget to work: Once you’ve created a budget that covers all of your monthly expenses and financial goals, it’s time to put your budget to the test. Try to live within your budget and see how it feels.
  1. Assess your budget: At the end of each month, look over your expenditures to see if they are matching up to your budget. If they aren’t, determine if you need to work harder to stick to your spending plan or if you need to rework your budget to reflect your actual spending.
  2. Assess and assess again: A frugal budget is never finished. Continue to look over your budget every month to catch areas of overspending. Then crunch the numbers again until you’ve made it right.


  1. Be honest about your spending habits, and you’ll end up with a much more realistic budget.
  2. Don’t forget to budget for fun; budgeting isn’t about total deprivation.
  3. Don’t be afraid to change your budget; a good budget is always evolving.