Budgeting Tips for Beginners: A How-To Guide

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You’ve heard it a million times: you have to create and stick to a budget if you want to win with money. Today, I’ll show you 4 easy budgeting tips for beginners.

Most people dread budgeting because they associate budgets with restrictions.

Au contraire, my friend! A budget gives you the freedom to spend your money the way you want to, rather than wondering where all of it went at the end of the month.

It’s a way for you to make your money work for you to reach your goals.

If you’re still hung up on the word “budget,” try calling it your “spending plan” instead. Same thing. 🙂

Grab a pen and paper (or your phone…whatever you want to use). We’re going to create your spending plan!

1. Add up your monthly income.

List all of the income you receive each month at the top of the page. This should include your paycheck, tips, commissions, side hustle income, child support—any income that you can count on every month goes on the list.

Add these numbers up. The total is the pot of money all of your expenses must come from.

Related: 21 Side Hustles You Can Start Today

2. Identify your necessary expenses.

Next, list all of your necessary expenses. Examples include housing (rent, mortgage, HOA fees), utilities (electricity, water, gas, internet), groceries, debt payments, insurance, cell phone, saving for your emergency fund, etc.

These are the expenses you will definitely have every month.

3. Identify your discretionary expenses.

Now list out extra expenses that aren’t necessities. Eating out, cable, movies, concerts, shopping, saving for vacation, and similar expenses go here.

4. Add up your monthly expenses and compare to your income.

Add up all of the numbers you identified in #2 and #3. This total is how much money you’re spending every month.

Compare the total in #4 (expenses) and the total in #1 (income). Hopefully, the income total is higher. If not, look for discretionary expenses you can cut or consider starting some side hustles to earn more income.

Getting control of your spending so that you’re living within your means is the first step in reaching your financial goals.

Congratulations! You just created your first budget spending plan!

What now?

Now that you can visually see where your money is going each month, you’ve got the ammo you need to make a plan to reach your financial goals.

Let’s say, for example, that you want to build an emergency fund, and your brand new spending plan shows that you’ve got a $100 buffer in your budget each month.

Now you can divert that $100 to your savings account until you reach your desired savings balance and not worry about whether you’ll be able to pay the rest of your bills.

If your spending plan did not show a buffer or if your expenses were greater than your income, consider ways to earn more income or decrease your expenses.

Keep in mind that spending plans are flexible, so if you spend more than you planned to in one category one month, that’s okay. Just take that amount from a different category so that you’re still spending within your means and not going into debt.

(Obviously, this money will need to come from one of your discretionary expense categories. Please don’t try to send AT&T a lower payment amount because you overdid it on the brunching this month. It won’t go over well.)

Budgeting takes some practice, but once you get the hang of it, you’ll reach your financial goals in no time.

What other tips do you have for beginner budgeters?