Budgeting for Beginners: A Step by Step Guide to Getting Started (2024)

Budgeting for Beginners: A Step by Step Guide to Getting Started (1)

I know, I know. Budgeting just isn’t the most exciting topic. But hear me out! You (and your bank account) can benefit in a big way from creating a simple budget. In case this is all new to you, here’s a guide to budgeting for beginners.

Included are some budgeting printable worksheets to get you started!

First, let’s look at why the heck you should even bother having a budget.

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👉 Join our FREE 3 Day Budget Quickstart Challenge! It’ll walk you through creating a custom budget for YOUR exact situation.

What are the advantages of budgeting?

The benefits of budgeting lie in the act of having a plan. A budget it just a plan for your money. That plan takes the stress and anxiety out of managing your finances.

It switches your financial focus from immediate, short-term, and reactive spending to a long-term frame of mind. Quite simply, it changes your perspective.

Just like you wouldn’t build a house without a blueprint, your money habits will be haphazard and reckless without a road map.

If you feel rather clueless as to where your money goes, drafting a plan for it is the exact thing you need!

Having this plan ensures that you have money for the things you need and want. It will help you create a system to stay out of and pay off debt.

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How do you create a budget?

Budgeting for beginners can be broken down into two main phases:

  • Tracking what you have been spending
  • Planning for how you will be using your money going forward

Tracking your spending

To get a sense of where your money has been going, look back at your bank account and credit card transactions for at least the past month.

These aren’t your monthly bills, but rather the miscellaneous amounts of variable expenses that you have control over.

Go through the list of your transactions, and write down the date and amount for groceries, eating out, clothing, and miscellaneous spending for the past month. Then total each column.

Example for a month of spending:

  • Groceries: $700
  • Restaurants, bars, & fast food: $400
  • Clothes: $120
  • Miscellaneous (Uber, Starbucks, lotto tickets, convenience store snacks, etc.): $250
  • Total: $1470

You may be shocked by the total when you add it up, but it’s important to have a starting point. You can trim your spending going forward.

Now that you have a better sense of where your money has been going, let’s create a budget. Stick with me, it isn’t really that difficult!

Creating a monthly budget

Step 1: Calculate your monthly income

Write down your monthly income from all sources. This includes your regular paycheck, plus any money your partner brings home, and what you earn if you have a side hustle.

Use your take home pay for this. That’s what you earn after taxes and other paycheck deductions. If your pay isn’t always exactly the same, you could either take an average of what it usually is, or base your budget on the lowest amount you earn.

Example:

  • Income 1: $2,500
  • Income 2: $1,500
  • Extra income: $240 (ie. side income earned from mowing 3 neighbors’ lawns a week.)
  • Total income: $4,240 a month

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Step 2: List your fixed expenses

A fixed expense is one that is the same every month. Your mortgage or rent, car payment and insurance, utilities, cell phone, cable, etc. are usually fixed expenses.

If your electric/gas provider offers it, enrolling in their ‘budget-wise’ program can make budgeting easier. They take an average of all your monthly utility bills, and you pay the same amount each month. That way you don’t get any surprise $300 bills when the weather gets particularly hot or cold.

Once you have your fixed expenses listed, add them up.

Example:

  • Mortgage: $1200
  • Utilities: $300
  • Cell: $200
  • Internet: $80
  • Car payments: $600
  • Car insurance: $180
  • Student loan payment: $250
  • Credit card (minimum payment): $29
  • Netflix, Hulu, and Spotify: $27
  • Total: $2866

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Step 3: Discover what’s left

Now that you’ve added up your income and totaled your fixed expenses, subtract the expense total.

Total income – fixed expenses = variable spending

$4,240 – $2,866 = $1374

Remember how you tracked your miscellaneous spending earlier? Take a look at that total. If yours looks like the example above ($1470), you may start to realize your problem.

If your variable, miscellaneous spending is $1470, but you only have $1374 left in your budget after you pay the bills, you are in the red.

Spending more than you earn is where many people get into trouble. Let’s fix it!

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Step 4: Create your financial goals

Now that you’ve taken an honest look at where your money has been going, it’s time to decide how you want to use it going forward.

What is it that you would like to improve about your financial situation? What can you adjust in your spending to make that happen?

If you have debt, such as credit cards, car loans, or student loans, paying those down and eventually off will create more room in your budget. Not to mention the cost of all that interest you’ll save.

Above all else, you need an emergency fund. Having at least $1,000 set aside for inconveniences such as car issues, medical bills, or household repairs is just necessary.

If your short-term financial goals are to pay off your credit card and save money in an emergency fund, maybe your first 4 months of budgeting will include:

  • $250 a month saved for emergencies
  • Extra $150 paid on credit card

In addition to paying down debt and creating your emergency fund, maybe you would really like to be able to afford a house in a safer neighborhood. Or to go on a vacation this year.

By spending less on those variable, miscellaneous things we talked about, you will find far more cushion in your budget to achieve your goals.

Related: How to Set Goals You’ll Actually Achieve

Step 5: Adjust your spending

Ok, you’ve determined how much money you have left after your bills are paid, and it’s time to decide exactly what to do with it.

Keeping in mind the goals you set, the remainder first needs to be used for food. That means groceries, not restaurants or fast food.

Costly entertainment, such as going to concerts, the movie theater, theme parks, casinos, etc. should be the very last item you budget for.

There are so many inexpensive (or free) ways to have fun, so spending money on entertainment just isn’t a priority, especially if you have debt or very little savings.

Don’t think of any of it as punishment. You’re rewarding yourself by paying yourself first. You don’t work as hard as you do to give all your money away!

Feel empowered by the changes you’re making, because it is completely within your control to adjust your spending. By doing so, you will have a lot more money to use toward those financial goals you set.

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How to make a change

If you spend too much at the grocery store, here are 5 ways to save money on groceries (without using coupons).

Or sign up for the Grocery Shopping Makeover Challenge, and slash your grocery bill in just 5 days.

Maybe you ‘don’t know how to cook,’ so you get take-out all the time. Here are 10 cheap and easy meals that ANYONE can make. And these 30 dinners can be made with just 1 lb. of ground beef.

If you wish someone else would plan your meals, check out $5 Meal Plan. For only $5 a MONTH, they’ll send you a weekly meal plan, complete with recipes and a shopping list. It doesn’t get any easier than that!

Let’s take a look at how you could adjust your spending, based on the miscellaneous spending example above.

By learning some grocery store savings techniques, you decide to go with a $450 grocery budget, instead of the $700 you were previously spending.

You start to plan your meals at home instead of eating out all the time, which allows you to cut your restaurant total in half.

Maybe you choose not to go to the mall or convenience store this month, probably saving yourself at least $150.

Using those examples, you would shave $600 off your spending. That could go into your emergency fund or toward your credit card debt.

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Optional Step 6: Earn more money

If you have far more bills than you have money, and you can’t (or don’t want to) cut back much on spending, consider earning more money.

You no doubt have a skill or two that someone would be willing to pay for. There are a lot of people who have more money than time, and want to pay for tasks taken off their hands.

Here are 21 ways to earn extra money to give you some ideas.

In conclusion

We did it! Now that you’ve followed this budgeting for beginners guide, you can create your own smart financial plan.

You have tracked your previous spending, totaled your income and fixed expenses, set new financial goals, and planned out how you will spend any remaining money.

You have created a budget! That’s really all there is to it.

Keep in mind that just like you can’t go to the gym once and expect to stay fit, you should take a look at your budget often.

It’s almost like a living thing, that can (and should) be adjusted on an ongoing basis. In fact, making a new one every month is a good idea if your income or expenses change often.

If you’re interested in some more resources for managing your money like a rock star, check these out:

Hopefully you can see the advantages of having a budget now. And feel empowered to make a change in your financial health.

Cheers to the new, budgeting you!

P.S. Don’t forget to join theFREE 3 Day Budget Quickstart Challenge! It’ll walk you through creating a custom budget for YOUR exact situation.

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Budgeting for Beginners: A Step by Step Guide to Getting Started (2024)

FAQs

Budgeting for Beginners: A Step by Step Guide to Getting Started? ›

Start by determining your take-home (net) income, then take a pulse on your current spending. Finally, apply the 50/30/20 budget principles: 50% toward needs, 30% toward wants and 20% toward savings and debt repayment.

How should a beginner start a budget? ›

Start by determining your take-home (net) income, then take a pulse on your current spending. Finally, apply the 50/30/20 budget principles: 50% toward needs, 30% toward wants and 20% toward savings and debt repayment.

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.

What is a good first step when budgeting? ›

Assess your financial resources

The first step is to calculate how much money you have coming in each month. This might be investment income, government assistance, student loans, employment income, disability benefits, retirement pensions or money from other sources.

What is the 50/30/20 rule? ›

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.

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. If you've read the Essentials of Budgeting, you're already familiar with the idea of wants and needs. This budget recommends a specific balance for your spending on wants and needs.

How to budget monthly for beginners? ›

50/30/20 rule: One popular rule of thumb for building a budget is the 50/30/20 budget rule, which states that you should allocate 50 percent of your income toward needs, 30 percent toward wants and 20 percent for savings. How you allocate spending within these categories is up to you.

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

  • Rent. The first and possibly biggest monthly expense to consider is your rent or mortgage payment. ...
  • Groceries. ...
  • Daily incidentals. ...
  • Irregular expenses and emergency fund. ...
  • Household maintenance. ...
  • Work wardrobe and upkeep. ...
  • Subscriptions. ...
  • Guests.
Feb 22, 2024

What are the 5 basics to any 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 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.

How to budget in 7 simple steps? ›

Follow these seven steps to start a personal budget that can help you reach your financial goals:
  1. Calculate your income. ...
  2. Make lists of your expenses. ...
  3. Set realistic goals. ...
  4. Choose a budgeting strategy. ...
  5. Adjust your habits. ...
  6. Automate your savings and bills. ...
  7. Track your progress.
Oct 11, 2022

How to budget correctly? ›

Here's what a budget that adheres to the 50/30/20 rule looks like:
  1. Spend 50% of your money on needs. ...
  2. Spend 30% of your money on wants. ...
  3. Stash 20% of your money for savings. ...
  4. Calculate your after-tax income. ...
  5. Categorize your spending for the past month. ...
  6. Evaluate and adjust your spending to match the 50/30/20 rule.
Aug 12, 2022

How to spend money wisely? ›

In this article:
  1. Create and Stick to a Budget.
  2. Prioritize Needs Over Wants.
  3. Use Your Credit Card—but Pay It Off Each Month.
  4. Know Your Values—and Your Triggers.
  5. Reduce Spending Where It Makes Sense.
  6. Consider Long-Term Costs.
  7. Limit Your Payment Options.
Mar 23, 2024

Is $4000 a good savings? ›

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.

How much should I be saving a month? ›

At least 20% of your income should go towards savings. Meanwhile, another 50% (maximum) should go toward necessities, while 30% goes toward discretionary items. This is called the 50/30/20 rule of thumb, and it provides a quick and easy way for you to budget your money.

What is zero cost budgeting? ›

The zero-based budgeting process is a strategic budgeting approach that mandates a fresh evaluation of all expenses during each budgeting cycle. Unlike traditional budgeting, where previous spending levels are typically adjusted, ZBB requires individuals or organizations to justify every expense from the ground up.

What does a start up budget look like? ›

Regardless, there are a few key components you'll see in every startup business budget template: Operating expenses: ongoing costs of running your business, like rent, utilities, and payroll. Capital expenses: assets your business needs to make money, like inventory or equipment.

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