Budgeting for beginners does not have to be scary.  If you are struggling with your finances, setting up a budget is the best thing you can do for your financial well-being.  You will have peace of mind knowing where your hard earned money is going and be better equipped to reach your financial goals.

Below are five tips for making budgeting for beginners not so scary


budgeting for beginners


1. Come up with a financial goal

Budgeting for beginners starts with coming up with a financial goal.  You have to have a strong enough “why” when it comes to achieving any goal. So why are you starting a follow a budget?  Do you want to start saving for your first home?  Start a college fund for your kids?  This is your “why” and what you will keep coming back to when it feels like things are getting tough and you feel that urge to splurge on those booties from the Nsale.   When you have eventually reached your financial goal, move onto your next one and adjust your budget accordingly.

2. Log all your finances

Your income, expenses and savings are key components of your budget.  You can use any free program like Microsoft Excel spreadsheet,  Google sheets to track all of your monthly expenses and spending.  You need to make sure you get granular and list out each expense. This list that you come up with will function as the foundation for your monthly budget.  Here is what you should be including:

        • List out your monthly income: Go through the pay stubs for everyone that contributes to the household. Be sure to include any income from side gigs, child support etc.  Basically any money that comes in regardless from where.  If your income varies, try and come up with an average for the past three months and use that.
        • List out your fixed expenses: Rent/mortgage, utilities (this includes internet and phone), car payment, all insurance costs, child care, groceries, all payments towards debt (credit cards, loans etc.)
        • Non-essential expenses:  This means any money that would go towards that Starbucks coffee, eating out, subscription and streaming services, memberships and other miscellaneous items that are not “essential” monthly payments. (i.e. include yearly payments or ones that don’t happen every few months like an oil change).

BTW, make sure you include a line for your savings.  You should be trying to save money as much as you can. This can be as little as $10.  If you save this consistently, in a year you will have saved $500.  Set up an automatic deduction from your paycheck and have it go into a separate savings account.  Budgeting for beginners tip: you can’t spend what you don’t have.

3. Budgeting for beginners looks like adjusting your expenses to fit your budget

Now that you have listed out all the pertinent financial details, how does your financial life look?  Are you living within your means?  Or are you spending too much money on takeout and specialty coffee drinks?  Chances are you are going to need to make some adjustments to your lifestyle if you want to meet those financial goals you came up with in step one.  Here is what that looks like:

          • Start cutting back:  The quickest way to start cutting back is to do away with those outings with friends and eating out.  What about your cable?  Can you maybe go with a streaming service that is much cheaper?  How is your grocery bill?  Do you meal plan or just wing it?  You will save tons by meal prepping or even going meatless once a week.
          • Look at your credit card debt:  If you are carrying debt and have good credit, you may want to look at transferring your debt to a 0% balance-transfer credit card. You can also look into a debt consolidation loan which will consolidate your credit card payments into one payment.  This will lower the amount of interest you’re paying every month.
          • Can you refinance any loans?: If you can refinance any student loans, car loan or mortgage for a lower your interest rate and cut your monthly payment, you can potentially save a good chunk of change.

Now, you do want to give yourself small rewards along the way in order to avoid burnout.  If you reach a savings goal, treat yourself to a Starbucks coffee.

4. Use that extra cash wisely

So what to do with your extra cash.  Of course put it to good use!  Not towards that designer handbag.  If you don’t have an emergency fund in place, you need to get one.  Uncertain times like the ones we are living in now are a testament to how your life can become upended at any time.  You need to be prepared as much as possible.   Not to mention, an emergency fund will help you stick to your budget.  When that unexpected thing happens like your fridge breaking, you will be able to cover it with those savings.   Just don’t forget that you need to get back to replenishing it as soon as possible.

5. Choose a budget that fits your lifestyle best

The best budgeting method for you is the one that you will be able to stick to!  Here are some of the most popular budgeting methods to choose from:

  • The Envelope System : This is a cash based system and is fitting for those people that tend to  overspend. You basically have an envelope for each of your varying expenses (like groceries).  You are paying yourself first which is key.  
  • The 50/20/30 Method : This method is for people who have more flexibility with their money.  They are able to pay their bills with 50% of their income. Then you put 20% toward savings and/or debt reduction and the other 30% is allocated for spending (entertainment, dinners out etc). This way, you can have fun and save at the same time.
  • The 60/20/20 Budget : Basically the same as the 50/20/30 and is for people who need to apply a little more of their income towards their living expenses.
  • The Zero-Based Budget : With this budget, you pay all your expenses and bills all the way down to “zero” and any extra money you put towards your financial goals. If you are looking to pay off debt as fast as possible this could be a good fit.  Also, if you are living to paycheck to paycheck this may work for you.
  • Budgeting apps:  If you want something at your fingertips, there are tons of helpful budgeting apps out there.  Here are some great ones to consider.

You have to stay the course

Once you get going, budgeting will become an integral part of your life that it won’t feel hard.  With that being said, you do need to check in with your budget regularly and adjust it accordingly.   If you are lucky enough to get an increase in pay, be sure to put that towards a savings goal.