The Importance of Creating a Budget

Before budgeting, we felt overwhelmed with our debt. As newlyweds, we didn’t think we would be able to afford more than the minimum monthly payments. After we started budgeting, it became clear that there were indeed opportunities in different categories to put towards our debt.

This helped us to visually see a path to becoming debt free.

As Josh mentioned in his last post, after starting to track and write down where your money is going, the next step is to budget. Budgeting allows you to see in which categories you can tighten up and which ones you are doing great. For us, a category we are always looking for ways to tighten up is our grocery budget (although we have reduced it quite considerably! #ThanksCostco). A category we do pretty well in is our gas budget. Our jobs are across the street from each other. We choose to take a couple extra minutes at night to coordinate the next day’s carpooling and other things we do in order to save on trips, time, and gas.

If you want to reach certain financial goals, you have to know where your money is going.

Are you spending too much in your clothes budget? Do you spend less than you thought in your eating-out budget? Ask yourself these questions for every category you have in your budget. The answers to those questions will reveal which categories you need to tightening up and how much extra you can put towards paying down debt. Before we did this, we thought we would not be able to put anything extra towards debt.

But once we started writing expenses down into categories, we saw that with a couple short-term sacrifices and small lifestyle changes, paying extra on debt would be easily doable.

This post will hopefully give you ideas about categories you can use that can help you succeed in budgeting. Budgeting is a beautiful, personal journey that is extremely fluid and flexible. Don’t let it overwhelm you- make it work for you! If you find that more broad categories work, then don’t do a very detailed budget. If you discover that you loathe recording expenses on a phone app, then try writing expenses down on paper. We’ve changed our strategy and method many times in three years and will again if we find something that works better for our lives. We did not start out with this many categories; we have added as needed.

I hope this post will enable you to start thinking about what categories you could possibly use for your own budget. Here’s what categories we currently have and examples of what expenses we usually put under them:


In order of highest percentage of our income to lowest:

  • House savings
    • This was labelled “Debt payments” until we became debt free.
    • We are currently saving the same amount for our house down-payment every month that we used to pay down debt (we are currently renting).
  • Rent
    • Our monthly payment to our rental company.
  • Giving
    • Our church and other charitable organizations.
  • Insurance
    • Combined car insurance
    • Health insurance
    • Renter’s insurance
  • Vacation savings
    • We save a small amount every single month so that when vacation comes, we already have saved for it.
    • We have a separate savings account to put this money into.
  • Baby fund
    • We did not have this category until we were debt free.
    • Similar to the vacation fund, small amount every single month.
    • We are not parents or pregnant yet, but we are slowly building up a nest egg. Our hope is that when we are expecting, our savings in this category will help offset all the expenses of being first-time parents.
    • We withdrawal cash and put it into a “baby fund” bank. We did this because we wanted to keep it separate from our vacation fund.
  • Utilities
    • Electric
    • Water
    • Trash
    • Common area charges
  • Auto Subscriptions
    • Netflix, Amazon Prime, monthly subscription boxes (niches like beauty, pet, or clothing items), meal delivery services, etc.
    • You might find some easy money to save in this category.
  • Cell phone bill
  • Internet
  • Emergency fund
    • This is a category we do not have anymore because we are satisfied with our emergency fund. If you have no savings at all, you will want to have a little cushion for emergency car repairs, health costs, etc., even while beginning to pay down debt.
  • Christmas savings
    • Same concept as vacation savings and baby fund.
    • The last four or five months of the year, we start to set aside a predetermined amount in order to have money set aside to buy Christmas presents for family/friends.


In order of highest percentage of our income to lowest:

  • Groceries
  • Eating-out
  • Miscellaneous
    • We put birthday presents for family/friends in here.
    • Things we buy for our house.
    • If something doesn’t really fit into another category, this is mostly a catch all.
  • Gas
  • Haley Miscellaneous
    • Anything I buy for myself (clothes, shoes, makeup, trip to get my hair done, etc).
  • Josh Miscellaneous
    • Anything he buys for himself (clothes, books, shoes, etc).
  • Household items
    • Mostly anything we buy at the grocery store that isn’t food
    • For example: parchment paper, aluminum foil, nonstick spray, etc.

I hope this gives you some ideas. In our next post, we will be discussing the importance of goal setting!

-Haley Klaas

If you would like to read more about our story, click here.


Great tips on how to break it down!

Thanks Krista! Have a great day!