How to Start Budgeting for Beginners

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Some people are scared by the thought of budgeting. They shouldn’t be.

Budgeting isn’t always hard though they might be at first. In fact, budgets can be fun. They can give you freedom. And help you reach financial goals.

So let jump in and start budgeting.

Why are you budgeting?

Before we get our hands dirty setting up your budget. You need to understand why you are budgeting.

Finding out you why will help you when you make other decisions about your budget. What kind of program should you use for budgeting? One that works with your why. How detail should your budget be? That also depends on your why.

What is your why? Your why is the reason you here to learn how to start budgeting.

If your mind just went blank check out my post 6 reasons to budget.

Now, remember those aren’t the only reasons to budget. You might come up with something that not in that post that OK.

Another way to think of your why is what would want do you hope to accomplish by budgeting? Do you want to save money? Are you trying to regain control over your finances?

There are a lot of reasons to budget. And lots of things you can accomplish by budgeting.

So come up with your why. What do you hope to accomplish from budgeting? Why are you interested in budgeting?

How are you going to budget

Once you figure out why your budgeting. You need to figure out how you are going to budget. There are tons of ways to budget out there. But almost all of them fall under one of these 4 categories.

  • apps
  • spreadsheet
  • cash
  • pen and paper

Now each one those methods have those pros and cons. You have to decide what would be best for you. And keep your why in mind when choosing you how you are going to budget.

Personally, I use YNAB which is an app. My why for budgeting is to save more. And YNAB allows me to set goals in the individual categories that help me to achieve my why. 

Plus if you use my link by clicking here you will get your first two months of YNAB for free.

See once again it comes back to your why. You might choose a different method for budgeting and that OK. As long it as it fits with your why and is something you would do it doesn’t matter what program it is.

Spreadsheets are tied to computers and harder to check on when you’re shopping. If you already are familiar with spreadsheets they might appeal more to you then learning a new program.

I hate spending cash so a cash based budget for me wouldn’t be a good idea. But if you struggle with overspending and rely on credit cards it might be perfect for you. The most common way people budget cash is cash envelopes.

Some people like having everything down on pen and paper. They make beautiful spreads in the bullet journals for their daily tasks. If that something you enjoy doing, feel free to budget that way as well. I really like this journal and these pens.

The point is we find a program that works for you. Something that you will do and something that supports your why. As long as your choice does those two things it doesn’t matter how you budget.

Know how much you earn

Most people already know how much they earn. But I want you to take a second and find out exactly how much you earn on a monthly basis.

This is important as you shouldn’t be budgeting more than you earn.

Today we are setting up a zero based budget. Which means we budget every dollar that comes into our possession until we reach zero. This also means we’re working with money you have right now, we are not going to budget money until you receive it.

If you have several income streams find the total of all of them.

If your income varies from month to month. I would try to build your budget around the lowest number and then if you earn more than that it’s a bonus. Instead of relying on that high number and panicking when this is a lower income month.

Take some time and figure out your income. If you don’t save pay stubs, look at your bank statements. They should show you how much was deposited.

Know how much you spend on a monthly basis

Now that we figure out how much you make, its time to think about how much you spend.

Currently, some of you may be overspending on a monthly basis. That OK we’ll fix that with our budgets. But you need to honest about how much you spend.

You might want to cut back in some areas. Be aware of your spending and think about how you can cut back.

It best to make slower more doable changes that you will continue to do. Then it is to cut your spending like crazy one month and then give up because it’s too hard.

So be honest about how you much spend each month. And on what you’re spending it on.

It’s easy to forget the little purchases you made. To get an accurate picture of your spending I recommend grabbing a few of your recent statements. Use both your bank and your credit card then pulling the numbers from there.

Remember the more you budget the more in tune with your spending you will be. Right now we need some rough numbers we can use to start budgeting with.

How detail should your budget be

It important that you track all of your spending in your budget. That doesn’t mean you need to have a million categories in your budget.

I fact I find that if you have too many categories you will confuse yourself. And make things more complicated than they need to be.

Exactly how many categories do you need in your budget? It depends.

Like I mentioned early I use my budget to help me save. So I have lots of categories for savings and only a handful of more general ones for spending.

If you are also using your budget to save check out all my post about saving here.

Here are some things to think of when figuring out how many categories you need.

If something important to you keep it separate.

I have every day giving fund for gifts and treating people in my life. This is something that I care about so I made sure to have a separate category for it.

You might have other categories that are more general. So you would put rent and utilities in one category as they are both housing costs.

One category I think everyone should have is a general misc type one. This will give you somewhere to put the odd purchases. And if need you could cover other categories from it.

For a while, it was my household category that was misc one as that where most of my odd purchases were for. Now I call it the slush fund but it still works the same.

Find the right mix of general and specific categories that work for you. If you’re having trouble refer back to your why. Would this category help me achieve my goals?

If you have more questions about what categories read my post about how to set up budget categories here.

Remember to experiment and try different things out. Nothing is set in stone we can change things later. This is just to get you started budgeting.

Commit to 2-3 months

A big mistake people make with budgeting is giving up to early.

Sure there are some ways budgeting can reward you immediately. But for most of the benefits from budgeting, it takes a little longer before you see them.

Things may be hard when you first start budgeting but the longer you budget the easier it will get.

When I first start budgeting I spent a lot of time budgeting and working on my budget. Since then I have gotten a lot faster with budgeting. And now it comes easy.

And you will get to that point as well. There will come a day when you will find budgeting easy.

First, you will have to go through the learning curve and it might suck a bit. But it will get better. One day you’ll start reaping the rewards of budget and it will all be worth it.

Play around + have fun

Now how will playing around make your budget better?

Most people take budgeting very seriously. You are dealing with money here and money important.

That all true but it doesn’t mean you can’t make budget fun.

Play around with your budget. See what it can do. Test it out. You might not use every feature you figure out but it worth trying different things.

I recently figured out how to set up repeat transactions in my budget. This makes budgeting easier for me as I have several automatic transactions that come out. This way I no longer have to manually enter them into my budget it just happens.

So play around with your budget, remember there isn’t one way of doing things. There are usually multiple ways for you to achieve your goals in budgeting. You just need to find a way that would work for you.

And as for budgets being fun, how long do you stick with something you hate. Not as long as you would stick with something you enjoy doing.

Try to keep budgets fun. Play your favourite music as you budget. Use your budget to save for your dreams. Try to find enjoyment in your budget, things don’t last long without it.

P.S. Want to learn more about budgets check out my post which has everything you need to know about budgeting. 

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How to start budgeting for beginners