The Beginner’s Guide to Budgeting

Read this simple guide on how to budget for beginners! This post walks you through how to make a budget from scratch.

A budget is a plan on how to spend your money. There are different ways to budget, but the best way to budget effectively is to create a zero-based budget. A zero-based budget is a type of budget where you allocate every dollar of your income towards an expense. In the end, the income = the expenses (and income – expenses = 0).

When you make a plan for every single dollar you earn, you gain more control over your money.

So what are the exact steps to creating a budget? I listed out five simple steps to teach you how to budget for beginners. Whether you have never budgeted before or just need a better way, this beginner’s guide to budgeting will set you up with a solid foundation on budgeting.

How to Budget for Beginners

Here are the five simple steps to creating your first budget. This step-by-step guide will help you create a budget with confidence and ease!

Step One: Decide on a Time Frame.

Will you budget monthly? Weekly? I personally favor budgeting by pay period. My husband is paid semi monthly, so I create a budget twice a month based on his pay schedule. Decide what time frame works best for you according to your pay schedule (or pay schedules if you have multiple streams of income!).

Step Two: List Your Income & Total It up.

Next, write down the income sources and the income amounts you expect to receive during the pay period. You might only list a single paycheck, or you may have multiple streams of income. If you budget with a spouse, you can list both sources of income.

Add up the income amounts to get your total income for the pay period.

Step Three: List Your Expenses Until Income = Expenses.

Now, you need to allocate every dollar of income you are expecting to receive to different expenses. First, write down the essential expenses, such as any bills you have due during the pay period, groceries, and gas. Then, assign the leftover income to other expenses, such as lifestyle, sinking funds, or debt. Do this until the total expenses equals the total income. This means you have created a zero-based budget!

You need to figure out your budget categories. Budget categories are all the income and expenses you have. Read about Dave Ramsey’s budget categories here! You will have numerous types of expenses, such as housing and food, but don’t forget savings and debt in this section as well. Write down a list of budget categories for everything you can think of that you spend money on. You may come up with more to add to the list later — you can always add to or adjust your budget categories.

Step Four: Track Your Actual Income & Expenses.

Creating a budget is just one part of the budgeting process. Once your budget is set and the pay period or month has begun, track your actual numbers! You need to track all income and all expenses, so you can compare the actual numbers to your budget.

Remember: a budget is just a plan for your money. You need to try to implement the plan, but sometimes, things come up, and you need to make adjustments. That is fine, but this is why tracking the actual numbers is important.

Step Five: Review & Repeat.

The final step is to review how well you stayed within budget. It might feel scary to look at the numbers when you’re not used to it, but knowing this information will help you create better budgets and hopefully better spending habits.

Ask yourself questions such as:

• Did I track every dollar?
• In which budget categories did I overspend?
• Did I reach my debt or savings goal?
• Which budget categories should I adjust next time?

Use the information you gather to make adjustments in your future budgets and spending habits. Sometimes, you learn that you need to spend less in certain categories. And other times, you learn that you need to budget more in that category because you can’t spend any less.

You should create your next budget before the pay period/month begins, so you will review your previous budget after your next budget has already been set in place. But don’t skip this step. If you are married, you can include your spouse in this step — sit down and have a budget meeting! Less than five minutes of reviewing the numbers will help you be more successful with your budget.

The budgeting process is a revolving cycle — you are constantly either creating a budget, implementing the budget, or reviewing the budget. Sometimes, the steps overlap a little, but you should always have a budget in place before the next pay period or month begins.

Personal Budget Example

To help you understand what a budget looks like, here is an example budget for a family who receives two paychecks bi-weekly. You can find my family’s real budget here.

Income

Job 1	$2,400
Job 2	$1,800
Total Income	$4,200

Expenses

Giving	$420
Housing	$2000
Utilities/Bills	$210
Food	$450
Transportation	$150
Health	–
Insurance	$125
School/Childcare	–
Lifestyle	$50
Personal Spending	$100
Sinking Funds	$150
Savings/Investments	–
Debt	$545
Miscellaneous	–
Total Expenses	$4,200

As you can see in this budget example, the total income equals the expenses. That means it is a zero-based budget.

Now, this is just a simple budget example. You should break down these expense categories further in your own budget. For example, you would list out each individual utility or bill you have — you would not just lump them all into one category. Make your budget as detailed as possible without it being overwhelming.

Also, this is just one pay period for this family, so they did not have to pay all of their bills with these paychecks. That’s why you see some of the budget categories were left blank.

More Budget for Beginners Tips

Here are some tips for budgeting beginners that will help you get over any budget roadblocks!

Practice & Give It Time.

Budgeting may feel awkward at first. You may completely fail at it a few times, too. Just keep practicing and give it time to get in a budgeting routine. Budgets are fluid and can change a lot, too. My personal budget looks a little different every month.

Keep Track of Subscriptions.

If you don’t keep track of subscriptions, start. You may be surprised how many you actually have and how many you could cancel! You need to limit the number of unexpected expenses that pop up because it could throw off your budget.

Start Sinking Funds.

Another way to avoid expenses that throw off your budget…use sinking funds to slowly save for expenses instead of paying for the whole thing at once. For instance, Christmas is hard to pay for in one month. Saving $100 a month for 12 months is easier than coming up with $1000+ in December. Another example is setting up a car maintenance fund for oil changes and general car expenses. You know these expenses are inevitable, so you might decide to save $50 a month in your car maintenance fund. That way you can limit the amount you need to cashflow for car expenses.

Set up sinking funds for things you know you need to pay for throughout the year, and regularly contribute to your sinking funds each month.

Use Cash.

If you have any trouble controlling your spending in a certain area, try to only use cash for it. For example, my husband and I started using only cash for eating out when we first started budgeting. Withdrawing the cash forces you to only spend what you have.

Put Money Towards Your Financial Goals Right Away.

If you are trying to save or pay off debt, move the money in your budget towards that goal at the START of the pay period. Don’t let it sit in your bank account any longer than you need to because you could feel tempted to spend it on other things.

How Can a Budget Help You Reach Your Financial Goals?

Why does creating a budget matter? When you budget, you can avoid wasteful spending and reach your financial goals faster. A budget helps you make a plan for your money, including a plan for what you want to save, invest, or pay towards debt. If you follow the plan, you are less likely to spend all of your extra money on unnecessary expenses, such as eating out, shopping, etc., and instead, put the extra money towards your financial goals. Being intentional about putting money towards your financial goals will help you reach them faster!

When my husband and I first started creating a zero-based budget, we found so much extra money to put towards our financial goals. We had a low income and tried to live frugally, but we still were able to find extra money that was going towards unnecessary things that we were able to redirect towards our savings and debt. We felt like we got a raise, but we were making the same amount of money as before!

Budget Template for Beginners

Now that you know how to budget, what is the best app or template to use to budget? Writing your budget down on paper is all you need, and that method can be very effective. However, if you’re looking for a template that makes the process quick and easy for you, I love to use my Google Sheets Personal Finance Tracker.

This template consists of over 20 tabs to help you organize your personal finances, including a dashboard, sinking funds tracker, net worth tracker, annual budget, 12 monthly pay period budget sheets, bill organizer, transaction log, & a tutorial video! This is what I personally use to easily budget and track the numbers for our family.

I’ve tried budgeting apps, and I always come back to the good ol’ spreadsheet because it’s so flexible and efficient. And my template makes it so easy to budget for beginners! It’s user-friendly and intuitive — even for those who have never touched a spreadsheet!

Conclusion

Budgeting is not difficult and can save you so much money and help you live within your means. It gives you a plan for your money, so you can be intentional with your spending and reach your financial goals. I hope this beginner’s guide to budgeting was helpful! My blog is FULL of posts on budgeting, frugal living, and other personal finance topics!

If you’re wondering how to budget money on low income, read this post next.

Pin it!