Whether we like it or not, money is necessary to do almost everything. It might not make us happier, but more money sure can make life easier—if you know how to wisely track and spend it.

No matter the number in your bank account, everyone needs to have a strategy, or budget, for managing their money to meet their lifestyle needs. The purpose of setting a budget is two fold: 1. A budget allows you to learn about your spending habits, and 2. it enables you to adjust your spending habits so you can save for bigger expenses down the road, such as buying a home, retirement, education for your kids, or a bucket-list vacation. By getting to know your spending habits, you can make a lot of smart changes that will allow you to protect your money in the long-run.

Before you can set a budget, you need to understand and document your monthly expenses. A simple Google sheet or Excel spreadsheet can do the job fine. I learned how to monitor and track my expenses when I was totally broke. I was just out of college with tons of debts and without a decent job. I noticed that my expenses fell into two categories: 1. Necessity items such as rent, food, student loan payments, insurance, clothing, car, gas, etc., and 2. optional items like a night at the movies or a latte run. Once I knew how I much I needed to cover my necessity items, I figured out how much I could spend on less important stuff.

How to Make a Budget

Here are simple steps to set a budget. Use the image above as your guide. Sign-up for my newsletter, and receive a link to download my “Monthly Budget Planning” document.

1. Create a simple Google sheet or Excel spreadsheet.
2. Under the “Category" column, list all necessary expenses, followed by additional expenditures.
3. Add “Monthly Income” beneath the “Category” list, and list your monthly income after taxes.
4. Under the “Budget” column, log your estimated cost for each item. It doesn’t have to be an exact amount.
5. In the following columns, list each month of the year.
6. Beneath each month, log your actual monthly expenses for each row. This is a critical step that will help you to recognize your spending trends. It takes only a few minutes to complete this task at the start of a new month, but it will provide you a wealth of good information about your expenses.
7. “Total Cost” is the sum of all of your monthly expenses. “Over / Under Budget” is a calculation field that deducts your “Total Cost” from “Monthly Income.” If it’s negative, then you’ve spent more than your allocated total budgeted; mark it red. If it's positive, mark it green and give yourself a pat on the back; you’re under your allocated budget and now have more money to save or spend.

How to Stick With Your Budget

When you examine your monthly expenses, you’ll see more clearly what to allocate for each item. Either you’re over (spent too much) or under (have extra money) your estimated budget. Now you can adjust expenses to meet your planned budget; in other words, reduce or eliminate some of those unnecessary expenses or put your extra cash into a savings account.

Building a discipline is critical for sticking with your budget. If you budget $150 a week for groceries, then every week all you have to spend is $150. No exceptions. If you find you need to spend more to get all your necessities covered, it's time to adjust your budget to accommodate this change, which means less money allocated elsewhere.

When I started my career, I established my own weekly expenses. First, I paid off all the important expenses, including student loans, and then I went bargain shopping so I could stay within my budget. For example, my family’s weekly grocery budget was $90. I shopped at the bargain grocery store, rarely ate out (even during lunch), and never bought anything I didn’t need, like alcohol. For entertainment, my wife and I went for long walks around the neighborhood or took the kids to local parks instead of the movies. Our main goal was to live a responsible lifestyle, pay our bills, and save money toward purchasing a home, which we did a few years later.

If this sounds daunting, start with small and simple adjustments. Give yourself a few months to settle on a realistic budget, and stick with it no matter what. The first few months may be tough, but it gets easier over time. Trust me, it pays off in the end.