Budgeting for beginners is one tough chore. It’s scary, intimidating, and really just hard. But knowing where your money is going and how to make it work better for you is so satisfying for your mind, spirit, and heart.
I have heard all the reasons to not have a budget…
I don’t make enough money.
I make plenty of money so I don’t need to budget.
I’m not a math person.
even…I just don’t want to know.
These are all excuses. Knowledge really is power. Skills like math can be learned. If you don’t think you have enough money to create a budget, then you are the one who needs a budget the most.
If you think you don’t want to know…then you have no idea what you are actually capable of. Your financial life could evolve into something AMAZING!
Even if all your bills are paid each month, savings and investing have been set to auto, and you have money left over for date nights and shopping sprees to Target, you are not fully aware of the potential your money could have for you.
What Happens If You Don’t Have A Budget?
You can call a budget whatever you want. Call it a plan, a blueprint, a money roadmap. But whatever you call it, you need one.
So many of us are maxed out. We are anxious, stressed and downright afraid of where we will be tomorrow. We have no idea where we will be next week and if we have enough money to get us until the next paycheck.
I have been there – gosh, I have been there. I have taken change back to the grocery store so my husband could have money for gas. Mind you; I wasn’t about to tell him that’s what was going on. I just told him the change jar was full and it was time. It was full because I went through everything including purses, pockets, drawers, and cars just to collect all I could so I could make it to another paycheck.
A budget helps with this. I now know what we have and where it is going. So much of my stress and worry is gone as long as I am using it.
It has done great things for my marriage, too! No more fibbing and sneaking around. All items are there in hot pink and aqua pens for all to see.
First Thoughts Before Creating a Budget
Tapping into those heartfelt reasons why you might want to have more money is a valuable step. Before you even decide to create a budget, decide that you want to take control of your money.
And then decide why you want to have all of the control. Maybe youre just tired of being stressed about money or tired of fighting with your spouse about not having enough.
Whatever the reason is, you have DECIDED that it’s time.
When you are new to budgeting, you really need to be aware of what you are spending your hard earned money on. Financial awareness is a big eye-opener. In this article from The Balance, they chat about financial awareness and the importance of it when tracking expenses.
The goal here is to spend less than you make so you can put that money towards debt and later, wealth.
This gives you the knowledge you need to assign the correct amount to each budgeting categories and will show you where you are overspending.
Make the Decision
Decide that it’s time to go for it. Today is the day that you start a budget. Commit to doing this for 6 months or a year knowing that it’s not going to be perfect and it’s going to take work.
Give yourself some grace and understand that changes will need to be made. Sacrifices will have to happen for the greater good.
This will not be forever. Just for now.
10 Steps to Creating a Budget
Understand mindset and short term goals.
This started above when we explored the reasons people may not have a budget. Understanding our relationship with money will give us an open door to how to manage it and how big we can dream.
Knowing how you feel about money first will determine the thoughts that you can replace them with.
And then, you can decide on the goals you might have in the next three, six, nine, and twelve months. even if those goals are just to stick with the whole budget thing.
Debt tracking and payoff.
When you are budgeting for beginners, let’s start with the hardest step first. it’s time to uncover the debts.
Look through all the papers and dig out all those account passwords online. List your debts, all the account numbers, interest rates, minimum payments, and whole balances.
Then put them in a lits of how you want to start paying those off. I prefer the debt snowball method – this is listing them smallest to largest. Some prefer listing them from highest interest rate to lowest interest rate and tackling those high interest rate debts first.
Fo me, knocking out those small debts first does something for motivation. being able to cross debts off your list fast, gives you an excitement to keep going..
Honestly, it doesn’t matter….personal finance is personal.
Income and an emergency fund.
I put these two together because they are both the most important part of financial awareness and budgeting for beginners.
You have to know how much you’re bringing in and you have to be prepared for an emergency.
Once you know how much money you have coming in, you will then be able to understand what to do with the amount going out. Do you need more money coming in to meet your needs and your wants? Or are you ready to become frugal enough so that incoming minus outgoing equals “doable”?
Decide that $1,000 emergency fund is enough for now and for those “just in case” moments.
Fixed and variable expenses.
Fixed expenses are those things that stay the same every month (for the most part). Budget items like rent or mortgage, cell phone, car insurance, and internet are all fixed expenses.
Hair cuts, groceries, gas, and electric bill are all variable. They fluctuate and also give you an opportunity to cut them back if needed.
You will need to know what all your expences are and write them down.
Variable expenses are a little harder to pin down. Looking through the past few months of bank statements will help you pull an average guestimate to work with.
Create the budget.
Now that you have all the basic info you need, its time to plug in all the numbers that you’ve been collecting.
But where do you plug in these numbers? You could just use a notebook and pen. Some people use spreadsheets or apps.
I prefer a budget binder. I’ve been using this system for the past 18 years and it’s the system that we credit to paying off over $70,000 in debt and our mortgage.
Creating a zero based budget walks you through making sure every penny has a job. Once all bills are paid, you will be able to see what amount of mony is left and decide how to allocate that.
If there isn’t money left over, then decisions will have to be made about how to make that happen. Selling things that you cannot afford is a possibility. If you have a $549 SUV payment and you have debt, deciding to sell that SUV and get something a little less each month (or even better, pay cash for an “ok” kind of car) might be the answer.
The other option is to make more money. Side hustles are a real thing.
Sinking funds and cash envelopes
Budgeting for beginners, using cash management and budgeting system is (in my professional, financial coach opinion) the BEST way to take control of your money and get out of debt.
Cash envelope’s main purpose is to show you how to only spend what you have budgeted. To stop you from overspending the things you find hardest to control. Groceries, clothes, dinners out, etc. Having a specified amount in each envelope shows you your limits and stops you from going over said budget.
Sinking funds are mini savings accounts for things that you know are coming. Saving for Christmas, pet visits, back to school, and birthdays, for example, are preparing a little at a time instead of trying to come up with $1200.00 for Christmas gifts three weeks before the big da and instead, using a credit card because the other is just not going to happen.
Long term goals.
After you have plugged in all the numbers, you get to decide on some long term financial goals.
When do yu want to be debt free by? Can you get a little extreme and do it faster?
If you are already debt free, how’s that emergency fund?
Do you want to save for a big expense like a house, a wedding, or an amazing European vacation?
For us, we are focusing hard right now on my husband’s retirement. There isn’t too much time left and so getting our finances into a place where we are secure and content is important.
When you are budgeting for beginners, your long term goals may be very different than mine.
Cutting back and living frugal.
Knowing all your numbers – income and expenses, debts and goals, its time to decide how bad you want them and what kind of life yu are willing to live to get there.
Cutting back on financial vampires and embracing frugal living might be the fastest way to get it done.
Frugal living doesn’t have to suck and it doesn’t mean there’s deprivation and boredom. And it certainly doesn’t mean restrictions.
Just the opposite. It gives you permission to spend on what’s most important to you.
While working out the details of the budget, the savings plan, and the debt payoff plan, don’t forget to add fun money in there. This is the key to fighting off frugal fatigue and keeping you motivated to keep going.
Knowing that you have a little bit of money every pay period that you can spend on anything thing you want is empowering and such a blessing.
The journey of budgeting and fulfilling those long term goals can be a long one. Give yourself some fun along the way.
Including the concept of 100% debt freedom is something I needed to address in this final step.
If you’re already there, SWEET! Great work!
If you are struggling with it, please don’t give up. Ask for help if you need it. Heck…reach out to me through the contact form on this site.
Just keep going. Creating a budget and being accountable for your actions – both past and present – is part of self development and being a functioning part of society. Don’t give up. I promise…it’s all 100% worth it.
Imagine what you could do if you didn’t owe anyone anything?
Common Budget Mistakes
As you dig into your spending, you may notice the bad spending habits.
Some examples might include:
- Unused services like gym memberships, or Patreon accounts for Youtubers that you don’t care for anymore.
- ATM Fees because that amazing Korean takeout place only takes cash – and you LOVE their spicy beef soup.
- Impulse shopping – happens to the best of us. Someone on the radio mentioned blueberry muffins, so you swing into Dunkin to grab one. Or you need to go pick up laundry soap at Target, and a super soft blush pink sweater catches your eye.
- Those overdraft fees build up when you don’t keep track of the account. Thank goodness for that $400 line of credit that’s attached to checking. At least nothing will bounce. Except, they charge you $30 each time you use it. Super awesome when you bought a $5 latte that then costs you $35 because of those fees.
Reevaluate and reassess.
As a budgeting for beginner student, remember to take it one month at a time. Be ready to change the budget as needed when needed.
I am a budget your paycheck kind of budgeter. This means every paycheck (which is every other week for us), I budget that paycheck instead of doing it once a month.
So I plan out two weeks at a time. Which bills need to be paid, how much do I need to put into my grocery cash envelope, and how much can I put into savings this week.
This gives me the freedom to adjust our finances as needed.
Final thoughts on budgeting for beginners…
Give yourself some grace.
If all this budget stuff is new for you, give yourself some grace these next few months. Allow yourself time to master a new skill. You will probably mess up and there might be mishaps. But it’s fine. Adjust, shake it off, and try again next month.
Remember, budgeting is not about taking away your freedom to spend or implementing restrictions. It’s about taking control of your money, deciding what’s most important, and focusing on that.