Beginner's Guide to Budgeting - Budget Jones's Diary (2024)

When you were in school, you learnt about things like Pythagoras theorem, how to make a fruit salad (yes, they taught me that in Food Tech) and what a Bleep Test is….Now I am sure these are very useful for some people (or not!); but if you are a mere mortal like me, when you finished school you struggled with adulty things such as finances, pensions, mortgages etc.

If you struggle with money and find yourself always waiting for the next pay day or perhaps you just wish to start tracking your savings for that luxury holiday, a budget will become your best friend.

So, what is a budget?

A budget, in simple terms, is an estimation of income and expenses, usually over a given period of time – a month or a year for example. It gives you the ability to visualise your money in vs your money out, which in turn will enable you to cut costs where not needed and achieve goals quicker. Your budget should not be designed so that it feels too restrictive and leave you with no money to enjoy yourself; but instead viewed simply as a tool to manage how you spend your money.

Here’s What You’ll Need

1. A goal – What is the goal of you setting up a budget?

Everyone’s answer to this question will be different. Some of you may wish to pay off your debt quicker by fully understanding where you can cut costs elsewhere to make room for bigger repayments. While others may be savings for a deposit on their dream home. Whatever the reason, understanding your ‘why’ is so so important as it will form the whole basis and tone for your budget. It will also make budgeting seem less of a chore as you will (hopefully!) see that your goals are within reach.

2. Work out how much you earn.

You will need to start off by working out how much you earn each month. You may need to grab bank statements or your payslips to aid you. If you are paid monthly it will make sense to prepare a monthly budget and if you’re paid bi-weekly, then set up a bi-weekly budget and so on.

3. Work out how much you spend.

Trying to work out all the bills you pay out will be tricky so this is the section which will most probably take you the longest to fill out. Digging out bank statements from the previous few months will help you greatly with remembering not only who you pay, but also how much. I would recommend splitting this section out in three parts: Fixed, Variable and Pots.

Fixed

These costs should be pretty straight forward to narrow down. They are items such as rent, energy, broadband etc. These do not fluctuate month on month so you can be confident what you have budgeted will be the amount you pay. For these, I like to write the due date next to the cost so mid-month I can track where I am up to.

Variable

These costs will fluctuate month on month so you may have to use judgement when budgeting these amounts. For me, this category would include items such as petrol, beauty appointments, nights out etc. But just tailor this section to suit your own personal needs.

Pots

Creating pots is a completely optional extra and what you may have seen being referred to as ‘sinking funds’ or ‘emergency funds’. This is money you set aside each month for a future event e.g Christmas. I like to build my Christmas fund up over the course of the year so that when Christmas finally does come around, I don’t have to reach for the credit card.

Review your budget regularly!

Reviewing your budget is a MUST. You will need to assess what has actually been deducted from your account and compare this to what you budgeted. If the actual cost was more than budgeted for, ask yourself why. Was the budgeted amount just an approximate? Have I overspent needlessly? Asking yourself these questions will help you better understand the costs which are under your control and give you that responsibility.

Reviewing your budget and reassessing your costs will also provide you with a better starting point for the next period.

It can be daunting looking at your finances in any great depth, so I’ve created a ‘Beginner’s Guide’ full of printable templates which you can purchase here. Having this handy will equip you with all the necessary tools to begin you budget journey.

Beginner's Guide to Budgeting - Budget Jones's Diary (2024)

FAQs

What is the 50/30/20 rule? ›

The rule is to split your after-tax income into three categories of spending: 50% on needs, 30% on wants, and 20% on savings. 1. This intuitive and straightforward rule can help you draw up a reasonable budget that you can stick to over time in order to meet your financial goals.

How to start a budget plan for beginners? ›

Follow the steps below as you set up your own, personalized budget:
  1. Make a list of your values. Write down what matters to you and then put your values in order.
  2. Set your goals.
  3. Determine your income. ...
  4. Determine your expenses. ...
  5. Create your budget. ...
  6. Pay yourself first! ...
  7. Be careful with credit cards. ...
  8. Check back periodically.

How do you budget for complete beginners? ›

How to do a budget
  1. Record your income.
  2. Add up your expenses.
  3. Set your spending limit.
  4. Set your savings goal.
  5. Adjust your budget.
  6. Make budgeting easier.
  7. Up next in Budgeting.

How do you start a budget when you're broke? ›

Budgeting When You're Broke
  1. Avoid Immediate Disasters. ...
  2. Review Credit Card Payments and Due Dates. ...
  3. Prioritizing Bills. ...
  4. Ignore the 10% Savings Rule, For Now. ...
  5. Review Your Past Month's Spending. ...
  6. Negotiate Credit Card Interest Rates. ...
  7. Eliminate Unnecessary Expenses. ...
  8. Journal New Budget for One Month.

Is $4000 a good savings? ›

Ready to talk to an expert? Are you approaching 30? How much money do you have saved? According to CNN Money, someone between the ages of 25 and 30, who makes around $40,000 a year, should have at least $4,000 saved.

Is the 50 30 20 rule outdated? ›

But amid ongoing inflation, the 50/30/20 method no longer feels feasible for families who say they're struggling to make ends meet. Financial experts agree — and some say it may be time to adjust the percentages accordingly, to 60/30/10.

What are the first 5 things you should list in a budget? ›

What Are the 5 Basic Elements of a Budget?
  • Income. The first place that you should start when thinking about your budget is your income. ...
  • Fixed Expenses. ...
  • Debt. ...
  • Flexible and Unplanned Expenses. ...
  • Savings.

What are the four walls? ›

In a series of tweets, Ramsey suggested budgeting for food, utilities, shelter and transportation — in that specific order. “I call these budget categories the 'Four Walls. ' Focus on taking care of these FIRST, and in this specific order… especially if you're going through a tough financial season,” the tweet read.

What is the simplest budget system? ›

1. The zero-based budget. The concept of a zero-based budgeting method is simple: Income minus expenses equals zero. This budgeting method is best for people who have a set income each month or can reasonably estimate their monthly income.

What is a good basic budget? ›

In the 50/20/30 budget, 50% of your net income should go to your needs, 20% should go to savings, and 30% should go to your wants.

What is a good monthly budget? ›

Setting budget percentages

That rule suggests you should spend 50% of your after-tax pay on needs, 30% on wants, and 20% on savings and paying off debt. While this may work for some, it's often better to start with a more detailed categorizing of expenses to get a better handle on your spending.

What is the best free budgeting app? ›

Best Budgeting Apps Of May 2024
  • YNAB (You Need A Budget): Best for Setting Goals.
  • Empower Personal Dashboard™: Best for Tracking Net Worth.
  • Goodbudget: Best for Envelope Budgeting.
  • Oportun (formerly Digit): Best for Passive Saving.
  • Monarch Money: Best for Replacing Mint.
  • PocketGuard: Best for Tracking Spending.
May 1, 2024

How to save money if you are poor? ›

Jaspreet Singh: 10 Ways To Save Money When You're Broke
  1. Quit Using Credit Cards. ...
  2. Cook More at Home. ...
  3. Plan Your Meals. ...
  4. Get Smarter About Free Stuff. ...
  5. Switch Your Provider. ...
  6. Visit Your Library. ...
  7. Look Into Refinancing Your Loans. ...
  8. See Which Perks You're Eligible For.
Oct 14, 2023

How to live off low income? ›

Additional Tips For Living On A Low-Income Budget
  1. Look for free and low-cost activities. ...
  2. Ask for a raise. ...
  3. Start a side hustle. ...
  4. Replace costly habits with inexpensive ones. ...
  5. Plan sequenced reward opportunities. ...
  6. Create accountability. ...
  7. Seek out low-cost alternatives to your hobbies.
Sep 14, 2022

What is a 50/30/20 budget example? ›

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings.

What is the disadvantage of the 50 30 20 rule? ›

It may not work for everyone. Depending on your income and expenses, the 50/30/20 rule may not be realistic for your individual financial situation. You may need to allocate a higher percentage to necessities or a lower percentage to wants in order to make ends meet. It doesn't account for irregular expenses.

What is the 40 40 20 budget rule? ›

The 40/40/20 rule comes in during the saving phase of his wealth creation formula. Cardone says that from your gross income, 40% should be set aside for taxes, 40% should be saved, and you should live off of the remaining 20%.

Is the 50 30 20 rule weekly or monthly? ›

Use our 50/30/20 budget calculator to estimate how you might divide your monthly income into needs, wants and savings. This will give you a big-picture view of your finances. The most important number is the smallest: the 20% dedicated to savings.

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