While money isn’t everything, money troubles are one of life’s top stressors.

In the face of rising living costs and economic recession, we can feel like our funds are out of control. This snowballs into anxiety and instability in other areas of our lives, because… well, money matters. 

In contrast, getting control over our finances bears fruit in the areas of our lives that do matter most: peace of mind, relationships, health, and our ability to help others. 

Here’s your guide to the best way to get back in control of your money: budgeting.

Step 1: Get on board with budgeting

It’s not easy. It’s not sexy. But it’s worth it. 

The foundation of a budget that works is determination and grit. You have to want it. You have to know why you want it.

Financial expert Dave Ramsey emphasizes that a budget gives you control over your money, allowing you to allocate every dollar to a specific purpose. Without a plan, it’s easy to overspend, accrue debt, or neglect savings. Ramsey often says, “A budget is telling your money where to go, instead of wondering where it went.”

A budget plan can help cover all essential expenses, prepare you for emergencies, and set the foundation for financial freedom. It allows you to work together as a family, align your goals, and build better financial habits. Those habits in turn make you a better person, because it turns out that the same virtues of moderation, prudence, and justice fuel financial and personal well-being. 

Are you motivated yet? Then let’s check out Step 2.

Step 2: Track your income and expenses

This sounds obvious, but very few people have a clear and specific system for tracking money in versus money out. 

Understanding your cash flow is key to mastering it. Here’s how to get started:

• List all sources of income: Include all after-tax income streams such as wages, side gigs, gifts, benefits, or any other sources of money coming into your household.

• Track expenses: Track every dollar you spend. Start with your fixed expenses (rent/mortgage, utilities, car payments) and then track your variable expenses (groceries, entertainment, gas). Many budgeting apps can help you capture each transaction as well as your income. Check out Monarch or You Need a Budget to get started.

• Calculate your total income and expenses: At the end of the month, total your income and expenses to see where your money is going. (If your expenses exceed your income, you need to make a change. That’s where Step 3 comes in.)

Step 3: Follow the zero-based budgeting system

One of Dave Ramsey’s core budgeting methods is the zero-based budget. This means every dollar of your income has a job to do. All of your money is working for you, and there’s no “extra.”

But you thought we wanted “extra” money? Wrong. There’s no such thing as a free lunch, and there’s no such thing as a throwaway dollar. 

Here’s how it works.

1. Assign every dollar a job

Take your total monthly income and divide it among all your budget categories, including necessities, savings, debt payments, and discretionary spending, until you reach zero. For instance, if your income is $2,500 per month, you need to assign that entire amount to categories such as housing, food, utilities, transportation, and entertainment.

2. Prioritize needs over wants

Our basic needs are pretty primal! They include food, housing, transportation, and clothing. 

I would also recommend you add “giving” as a basic need and make charitable gifts a planned part of your foundational budget. Traditionally called “tithing,” there is a deep wisdom in living the truth that every dollar we earn is ours to do good with.

We have a primordial need to give to others what was freely given to us. Besides promoting gratitude in ourselves and doing material good in the world around us, “giving” as a part of our “needs” budget orders our thinking about money rightly. 

 These five essentials should be funded first. After covering these, you can move on to other categories like insurance, savings, and debt payments.

3. Avoid “miscellaneous” spending

One common budgeting pitfall is using vague categories like “miscellaneous.” Remember: The point of a budget is to be specific and intentional. Vagaries like “misc” will hamstring your goal of financial thriving. 

Step 4: Give the plan a chance

Once every dollar has a job, it’s time to commit to your new, frugal lifestyle.

You only have $45 next month for entertainment? Stick to it. Cancel those unused subscriptions, pick one movie you want to see (is there a matinee?), and maybe host a game night at your home to avoid overspending in that category.

Only $400 for groceries? Once the $400 is gone, you cannot buy any more until the next month starts. So plan accordingly. Break your monthly allotment down into four or five grocery store trips to make sure you have enough at the end of the month. 

That being said, stay alert and flexible. If a certain category needs less money than initially budgeted, you can — and should! — move that money to another category the next month.

The key is sticking to the budget you crafted for the current month.

Step 5: Build an emergency fund

Life is unpredictable, and your budget should start reflecting that. 

Unexpected expenses — like medical bills, car repairs, or job loss — can derail your budget if you’re unprepared. Shockingly, in 2023, 49% of Americans reported being unable to afford even a $1,000 emergency. 33% have no savings at all.

Credit cards should never be your emergency plan, since that is the fastest way to rack up uncontrollable debt.

Dave Ramsey suggests building a starter emergency fund of $1,000 as quickly as possible. Once that fund is full, start budgeting dollars toward a fully-funded emergency fund: saving three to six months’ worth of living expenses. 

Cutting out unnecessary purchases in order to direct dollars to that fund is worth two years — or more! — of building that safety net. Save the money in an account that keeps it liquid, or easy to access quickly. 

The goal is to keep your emergency fund as insurance, not as an investment, so prioritize security and accessibility. Simple savings accounts, money market accounts, and high-yield savings accounts are the best places to look.

Step 6: Debt elimination

Debt-free is the way to be. 

While some debt, such as very low-interest loans or mortgages, can help build wealth, most debt is bad. 

Once you have your starter emergency fund in place, your monthly budget should add two prongs: 

1. The fully-funded emergency fund (see Step 5)
2. Paying off debts, starting with the smallest

I keep returning to Dave Ramsey because his plan worked for our family. His “snowball debt” plan makes the most sense for middle-class Americans facing the challenges of our modern economy. 

Check out his Debt Snowball Method here. 

Step 7: Live, laugh, love… adjust

As with all human virtues, financial prudence is an ongoing activity. 

Financial needs change over time, as does income, family size, cost of living, and even your own goals for your money.

The budget is just one tool in living well — but it is essential for anyone who wants to be a better steward of the gifts and rewards entrusted to them. 

A monthly budget meeting to review surprises, successes, and even failures is a powerful way to take control of your finances, reduce debt, and build a secure financial future. 

Remember, the key is consistency, discipline, and communication. 

The rewards are peace of mind, confidence, and freedom.