Creating a budget is a good way of planning how you want to spend your money, but that's not where you want to start. Instead, start with what you are spending today, understand how you have been prioritising, and make changes from there.

Heres a simple guide to get you started.
Use a tool like Cirka to do this really easily!

Step 1 — What are you spending now?

The first step in creating a budget is to get an overview of your current expenses. Make a list of all your expenses, including fixed costs like rent or mortgage payments, utilities, insurance, debt repayments, and also variable costs like groceries, entertainment, transportation, and other more sporadic expenses.

Go through your bank statement to understand your actual spending on things like subscriptions, cafe visits, snacks on your commute. Take it all in!

Step 2 — How much are you making?

Next, calculate your total income, including your salary, bonuses, child allowance, and any other sources of income. For most people this is a quick one.

Step 3 — Simplify the overview

Once you have an overview of your income and expenses, it's time to group your expenses into categories. Categories help you understand your spending habits and where you spend more money. Examples of categories include housing, living expenses, transportation, subscriptions, and personal care. You can group yours exactly as you want, as long as it makes sense to you.

What tool should I use?

Many people use tools like tables in Excel or Google Sheets. But these tools make it quite difficult to get started. They're simply too complex to get anything done quickly, and keeping them updated is a hassle.

Instead, we suggest using the Cirka app to set up your budget. Cirka is made for regular people like you and I, making it incredibly simple to create and maintain a budget. The app will even help you understand your finances better with various smart insights!

— Written by Søren Clausen, Founder of Cirka