Are you brand new to budgeting and looking for a beginner’s guide to budgeting to get you started?
You’ve come to the right place!
Or, have you tried it and “failed”, then found this post?
I say “failed” because it’s not failing if you learned from it and are picking up the pieces. It’s just part of your financial journey.
With that out of the way, let’s talk budgeting!
What exactly is budgeting, and why do I need it?
A budget is simply tracking your finances, incoming and outgoing, over a period of time.
It helps you keep everything in order, to ensure you don’t overspend for the month. Or even worse, can’t pay your bills for the month.
Many people don’t want to start one because it seems like it’s too difficult. Or that they don’t need it. There are an assortment of myths about budgeting out there that people tell themselves, that simply aren’t true.
The reality is that everyone should have a budget.
It keeps your finances in order to ensure you can pay your bills and not overspend, living paycheck to paycheck.
Where do I start?
This all depends on what you feel you could keep up with best.
For me, I was able to keep up with a spreadsheet the best. I make it a point to open the same file at least once a week and play with the numbers.
So, what do you feel you could keep up with?
Do you prefer using an app? There are several great budgeting apps out there that are simply a plug-and-play tool, doing all the math for you.
Do you prefer using spreadsheets? There are tons of pre-built spreadsheets with formulas already embedded, also making them a plug-and-play option.
Do you prefer using pencil and paper? There are really cool budgeting binders available to keep you completely organized. These binders and planners are great for the person who wants something they can hold and flip through easily.
Lay out monthly expenses
This is where most struggle and start looking for a beginner’s guide to budgeting. I promise you it’s not bad.
The hardest part is going to be the beginning. It’s gets incredibly easy from there.
Start by sitting down and listing out all of your monthly expenses. As to not make things overwhelming, start with your monthly bills. Things that come out on the same day, month by month. And I mean everything, down to your Netflix subscription.
Next, write down how much you think you might need on essentials for the month, just based on what you’ve spent in the past. Think groceries, gas, pet food and vet, things like that. Chances are, you will have to change the number you write down, and that’s okay. Everyone goes through that at first.
And next, your non-essentials that you typically spend money on each month. This could be entertainment, restaurants, and other non-essentials.
Finally, write down how much money you should bring in for the month. Do you have an irregular income? No sweat, check out this post to help you with that.
Put it all together
Finally, we’re going to take the budgeting tool we found and plug in our incoming and outgoing money for the month.
It’ll be really easy to do this for your incoming money and for your monthly bills, since these typically happen on predetermined dates during the month.
Once those are put into the tool, you’ll start fitting in your variable amounts, like groceries, gas, entertainment, etc. that you wrote down. I like to find lulls in my monthly bills and add these variable expenditures.
For example: let’s say I get paid 2 times per month (the 1st and 15th). My mortgage (a bigger expenditure) and a few other bills come out on the 1st. Smaller bills, like my car insurance and electricity come out in the middle of the month.
Since the middle of the month sees less money going out, I might put my larger variable expenses (like groceries) around the 15th paycheck instead of the 1st.
It’s a fun game of Tetris, really!
And you’ve just completed your first budget!
When it comes down to it, there’s not a lot that goes into budgeting.
The tools out there today do a lot of the work for you, luckily.
Your job is to keep up with your incoming and outgoing money for the month, and make you sure you keep tracking that in your budget.
Chances are, it will take a few monthly cycles to really understand your spending habits.
Like, for us, we grossly underestimated how much we spent at the grocery store! I couldn’t believe how much we went over budget at first.
But that’s the beauty: you learn your spending habits and adjust your budget accordingly.
Remember: a budget is to keep you from overspending and living paycheck to paycheck. So if you are spending a lot in one category, you’ll have to shrink a different category (like entertainment, for example) to accommodate it.
Did this beginner’s guide to budgeting help you? Have you had a difficult time starting your budget? What has held you back? Is there anything specific you are getting held up on?
Or, have you started a budget and felt like you failed? What did you think you failed on?
Let me know in the comments!