Below, you will find an unedited chapter from my new book about wealth building, investing and personal finance, The Ten Year Turnaround. To get your copy of the book, visit

making a monthly spending planYou must gain control over your money or the lack of it will forever control you. –Dave Ramsey

Let’s face it. Nobody likes budgeting. Budgets are boring. Budgets tend to take a lot of work to put together on a monthly basis. It’s often hard to get the numbers right for the first few months of budgeting. They can be hard to follow if you have never lived off of a budget before. Worst of all, budgets constrain your ability to spend money and have fun.

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In the short term, it would be much more enjoyable to just forget about budgeting all together and spend what you want on whatever you want. However, we’re not looking for short term enjoyment. We are playing a much longer game that will enable us to build wealth over the course of the next ten years. If you want to build wealth, you are going to need to save and invest a significant portion of your income each month. The best way to make sure that saving and investing for the future remains a priority in your financial life is to create a monthly spending plan and sticking to it.

When many people think of budgeting, they think of complicated spreadsheets, managing check registers or putting cash into envelopes. While this is how most people did budgeting 20 years ago, there are much better ways to budget today. There are tools that will help you develop a spending plan in less than an hour and will automatically track and categorize spending from your credit or debit card. If you spend more than 20 minutes per week thinking about your budget, you’re doing it wrong. In the remainder of this chapter, I’ll show how you to create a budget that actually works, is easy to manage and will enable you to put financial margin in your life so that you have the ability to safe and invest in the future.

What is a Budget?

Budgeting is simply the process of developing a plan that will determine how you spend your monthly income. In other words, a budget is simply a monthly spending plan. In order to create your budget, make a list of the income sources that you expect to make next month and total that amount. Include every source of income in that number, including your salary, money from any businesses that you own, cash from part-time jobs and any investment income that you might receive.

Once you know how much you can spend each month, make a list of spending categories and determine how much money you want to spend in each category every month. When I put together a budget, I always put charitable giving and investing at the top of the budget so that they remain the top priority in my life. I then list out all of my basic living expenses, including, housing, food, utilities and transportation. I then list out insurance and any other recurring bills that need to get paid each month. At the bottom of the budget, I put down categories that are more wants than needs, like the large bills I rack up with Amazon for books and each month. The general rule of thumb is that the highest priority categories should list first to ensure that they actually get funded in your budget.

The total amount of money that you allocate to your spending categories should match up to the amount of income that you earn each month. Every dollar that you earn should be in a category in the budget so that there aren’t any extra dollars floating around your bank account that don’t have a plan attached to them.

When the month you are budgeting for begins, commit to only spend what you have decided ahead of time. If the money isn’t in your budget, don’t spend it. If there’s something you absolutely have to spend money on, you’ll have to adjust your budget and take money out another category so that you can pay for the unbudgeted expense that came up. Keep track of your spending to make sure that you don’t blow-out any category using a spreadsheet or online budgeting tools. If you can stay within the spending limits for each category that you created, you have successfully lived on a budget. When the end of the month comes around, setup the following month’s budget so that you are ready for the next month’s budget on the first of the month.

It takes time to budget effectively. For the first few months, you will find yourself constantly adjusting what you put in each of your categories because you probably do not know what you spend each month. After you have gone through two or three budgeting cycles, you will learn what you generally spend in different areas and the process will become more natural to you.

Why Create a Monthly Budget?

Your budget is the tool that enables you to use your money to achieve your financial goals. When you don’t have a monthly budget in place, you are naturally inclined to spend money freely and hand over your credit card whenever there is something you want to do that requires money. Working toward long-term financial goals doesn’t come natural to most people. You probably wouldn’t achieve your financial goals unless you have a month-by-month plan to work toward them. Your budget is that plan. A budget will shift your spending from what feels good now toward what will be best for you and your family in the future.

Budgets also enforce financial discipline in your life. When you aren’t keeping track of what you spend, it can be very easy to spend more than you make each month without even realizing it. You may put all of your expenses on a credit card each month, pay some of it off each month but never quite get back to zero. Over time, your spending and interest charges add up and you have a large mess of a credit card debt to deal with. When you have a budget in place, you immediately know when your spending has outpaced your income in a month and can take action to correct that issue.

Online Budgeting Tools

When I first started budgeting, I used the envelope system, which involved putting cash in categorized envelopes. It didn’t take long for me to realize that putting cash in envelopes probably wasn’t going to work well in a society that primarily uses debit and credit cards to make payments. I briefly toyed with downloadable budgeting software and I then transitioned into using a spreadsheet that I put together from a template I had found online. I used that spreadsheet for many years until I realized that web-based budgeting systems are really the best way for anyone to budget in the 21st century.

Web-based budgeting software tools have gotten so good that if you are going to put together your first budget, you would need an extremely compelling reason not to use a tool like or You Need a Budget. These tools will provide you a step-by-step process to create your first budget and then will automatically track your spending to show how close you are to the plan that you created on their website or in their app.

Online budgeting tools can help you out in a number of different ways as well. Here are some other features and benefits that are common in web-based budgeting tools like

  • Receive a free copy of your credit score and credit report.
  • Get automatic alerts when bills become due.
  • Track your investments and your personal net worth.
  • Receive alerts when large transactions happen in your account.
  • Develop savings goals for specific purchases.
  • Automatic sync with your credit cards and bank accounts.
  • Receive an automatic weekly summary of how you are doing compared to your budget.
  • Access your budget from a mobile app.

Here are some of the most popular online budgeting tools:

How Do Web-Based Budgeting Tools Make Money?

There are two prominent business models for online budgeting tools. offers its service to consumers for free and makes money by promoting credit cards, savings accounts, mortgages and other financial products to its subscribers. While doesn’t promote any really bad financial products, just be aware that they are getting paid to promote the products that the list. Other services, like You Need a Budget and EveryDollar, charge a small monthly fee to use their service (typically $5.00 or $10.00 per month).

Can I Trust Web-Based Budgeting Tools?

Many people wonder if online budgeting tools are secure and safe to use. No one would want to connect their bank account to an online budgeting tool if there was a chance that your financial accounts cold be compromised or stolen. There is risk of identity theft whenever you make a payment with a credit card in person or online. That’s just the reality of the world that we live on. When a major retailer’s database gets breached, they send you a form letter and you probably continue to shop there. If’s security was breached, you would close your account immediately and never use them again. They would be out of business overnight. and their competitors know this and are working around the clock to make sure that your financial data is safe.

As someone that has a computer science and web security background, I have personally trusted my financial data with multiple well-known online financial tracking tools like Granted, I probably wouldn’t hook my bank account up to a website that I have never heard of before. When it comes to well-known tools like Credit Karma, Mint and Personal Capital, I have no hesitation or concern about their security practices or the safety of my financial accounts in their hands.

Budgeting with an Irregular Income

If you are an entrepreneur, a commission-based sales person or otherwise have an income that fluctuates from month to month, budgeting can be a more challenging task. When you aren’t sure how much money is going to come in any given month, prioritizing your budget becomes much more important. If you have an irregular income, your expense categories should be listed from most important to least important. As money comes in throughout the month, you pay the most important categories first and keep working down the list of categories until you run out of money. There might be some “would be nice” categories that you just don’t get to if you have a month where your income is lower than usual. If you have a better than average month, you can fully fund all of the categories in your budget and do a separate spending plan for any money that comes in on top of your normal budget amount.

Another strategy to dealing with an irregular income is setting up a separate savings account called a “leveling fund” that helps smooth out the amount of income you make each month. First, try to determine what your average income has been each month over the last year. Use that as the baseline for how much you should allocate to spend in your monthly budget. If you have a better than average month, stick the extra income into the leveling fund and only live off of your 12-month average income. When you have a month where your income falls below your 12 month average, you can dip into the leveling fund so that you can continue to spend your average income.

Budgeting Extra Money

Every now and then you may find yourself with some extra money that you weren’t planning on getting. You might have put in some extra hours at work, earned some money doing a gig on weekends or received some money for your birthday. When extra money shows up, you should put it toward your next financial goal. Maybe you want to pay off a debt, build your emergency fund or work on maxing out your Roth IRA. You should always have an idea in the back of your mind where you are going to put any extra money that comes in so that you’re prepared if you get an extra few hundred dollars in a month.

If some kind of major financial windfall comes your way, such as a large bonus or an inheritance, let it sit in a savings account for at least 30 days before doing anything with it. I would consider a financial windfall anything more than the equivalent of one month of your income. Financial windfalls don’t happen very often and nobody would want to look back a year down the road and realize that they squandered an opportunity. You wouldn’t want to go out and buy something expensive that you would normally never buy and look back at that purchase with regret when the money runs out. Take some time and really think about what the best use of that money would be before doing anything with the money. A couple of years ago, I received a six-figure payout from the sale of part of my business. I left that money in my savings account for 90 days before deciding to put some toward taxes, some toward giving and investing the remainder in the market.

Budgeting Alone Won’t Make You Wealthy

I believe that everyone should create a budget and track their spending because you will know with certainty that you are living on less than you make and that you spending patterns are in alignment with your long-term financial goals. However, creating a monthly spending plan alone won’t automatically make you wealthy over a long period of time. You can be the best money manager in the world, but if you don’t make much money and have a lot of fixed monthly expenses, you are never going to become wealthy. Budgeting alone simply can’t make you wealthy. If you want to build long-term wealth, you will have to significantly increase your income using the strategies outlined in chapter two of this book. By earning a large income and living of a fraction of what you make each month, you will have hundreds or even thousands of dollars left over at the end of each month that you can use to invest for your future needs.

Don’t Skip the Latte

Many personal finance authors tell their readers to cut out their morning latte, to quit smoking or stop going out to eat for lunch ever day so that they can save an extra $5.00 or $10.00 per day. They show how a little bit of money saved each month can add up to a lot of money over the course of a couple of decades. Let’s say that you actually took this advice and stopped getting a $4.00 latte on the way to work each morning. You would be able to save around $80.00 per month. If you did this for ten years and actually invested the money, you would have around $15,000 in your investment account if the market returned around its historical averages. I don’t know about you, but I would get a lot more joy out of having a latte every morning for ten years than having $15,000 in a savings account ten years from now.

When putting your budget together, the goal shouldn’t be to cut everything little fun out of your life so that you can put a little bit extra away each month. The goal should be to develop a sustainable long-term financial plan that you can actually live on. If you can’t easily afford a morning trip to Starbucks or can’t afford to go out to lunch with some friends as part of your monthly budget, you have a problem with your income, not your budget. If your small daily enjoyments can’t fit into your budget, look for ways to increase your income rather than simply trying to eliminate them from your life.

My Budgeting Plan:

Take a moment to write down how you plan on putting your budget together. What date will you begin living on a budget? What tool(s) are you going to use to create your budget and track your spending each month? How are you going to make sure that you are on track with your budget? How are you going to make sure that saving, investing and charitable giving remain a priority in your budget?

Budgeting When You’re Wealthy

When you begin earning more than six figures each year, budgeting looks a lot different for you than most people. Unless you’re living a really expensive lifestyle, there is probably not much of a concern about whether or not your bills are going to get paid each month. I still generally recommend that wealthy people do a budget, but the actual layout of the budget can look at a lot simpler. My wife and I currently only have five categories in our monthly budget, because we know that all of the bills are going to get paid each month and that we would still have quite a bit left over even if we blew out our budget and spend more than we were planning to in any given month. For wealthy people, budgeting is much more about tracking your total spending each month and making sure that you can save, give and invest the dollars that you want than it is to make sure that the most important bills actually get paid. As a wealthy person, having a plan person will ensure that you don’t outspend your income and will make sure that you can still hit your major financial goals.

As you begin to build wealth, you will notice that your time begins to be more constrained. When you create a lot of economic value in the world, there will be more demands placed on your time. People that are becoming wealthy tend to do a lot more and be a lot more active in the community than those that aren’t. They also have greater demands placed on them at their job or their businesses. When you become wealthy, your budget should reflect this reality.

As you begin to build wealth, there are some things that it just doesn’t make sense for you to do anymore. If you make $200,000 per year, your time is worth $100.00 per hour (assuming you work 40 hours per week for 50 weeks each year). If you find yourself doing a bunch of $20.00 an hour tasks around your house at the expense of creating economic value in your job or your business, you should hire out that work to someone else. For example, it rarely makes sense for wealthy people to do their own lawn care, snow removal and house cleaning. Periodically ask yourself what tasks you should stop doing and start hiring out and then integrating those into your monthly budget.

The Lifestyles of the Rich and Famous

If you begin to do really well in life and are earning six-figures a few times over, you are going to have to seriously consider what kind of lifestyle that you want to live. Do you want to drive a Ferrari, live in a million dollar plus home that’s on the edge of a lake or a golf course and show off your wealth on every possible occasion? Or, would you rather live a more upper middle class lifestyle? You might get slightly more enjoyment out of having a big house and buying a lot of really nice stuff. Or, you might feel better about spending less, not showing your wealth to the world and having more money to give and invest.

My wife and I have intentionally chosen not to live a “millionaire lifestyle” for a few different reasons. We have a nice house and both drive relatively new Honda’s, but you won’t see us flashing money around or purchasing really expensive stuff just because we can. We’ve decided that we’re happy where we are at and believe that a nicer house, nicer cars and fancier stuff won’t make us any happier than we are today. We also want our children to grow up in normal home with normal stuff so that they don’t become spoiled, entitled and think that they should be able to have everything they want. Finally, we get much more joy out of building wealth and giving to charity than we do having nicer stuff.

I don’t advocate extreme frugality, but I do think there is an upper limit to the amount of joy that you will receive from having a nicer lifestyle. Owning a Porsche or a Mercedes-Benz probably won’t make you any happier than driving a Honda or a Toyota. Remember that your personal happiness comes from within and not from having nicer stuff. You also introduce a new set of problems when you everyone knows that you’re wealthy and you’re not afraid to show it off. As we discussed in chapter 1, if everyone knows that you have money, there are going to be people that try to get your money. It can also be a lot of work to manage all of your stuff when you have a luxurious lifestyle. You might need to hire people, like a maid and a gardener, just to maintain your house. There’s something to be said about living a simpler lifestyle and not having to keep track of or worry about all of your stuff.


While most people have negative preconceptions about budgets, creating and following budget doesn’t have to be hard or time consuming. By using modern web-based budgeting tools and a little bit of discipline, you can create and track your budget in an hour or two each month. With your budget in place, you will make sure that you are working toward your long-term financial goals and are not spending more than you make each month.

Action Steps

  • Commit to creating a personal budget each and every month.
  • Select what online budgeting software you want to use.
  • Create your first monthly budget.