When I sit down to have a coaching session with clients, the first thing they ask is how do I come up with a budget? They seem to be lost and intimidated. Budgeting for beginners is a colossal task.
My answer whenever talking about budgeting for beginners is before you attempt a budget, you must track your spending. How in the world are you going to be able to know what your budget categories are or how much you could even guess to put into those budgeting categories without first knowing how much you are spending.
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.
I have mentioned the statistics before. How many people don’t have one, how many people live paycheck to paycheck and how many people have zero ideas of where their money goes every paycheck
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. Yes. Sometimes I slack. Sometimes I feel like I can do it without the binder, printables, and pen. I think – there are people all over that have everything they need right in their head. I am organized. I can do that. And then I get a text that says I forgot to pay the cell phone bill.
Back to the binder, I go.
And 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 colors for all to see.
The First Step In Budgeting For Beginners
The very first thing you need to do before you sit down and make a budget has to be a conscious choice to track your spending. Budgeting for beginners is hard enough but when you have no clue how much you spend on gas or groceries, how on earth are you expected to budget it?!?
So for one month, write down everything you buy. Everything you spend money on needs to be accounted for. And you need to do it for an entire month.
If you use your credit card or debit card for all expenses, you already have this done for you. Just go online and pull up the statements.
This may sound a little crazy, but do not try to change any behaviors. We need a full picture here, and I want you to see all normal behaviors.
Why Do I Need To Track My Spending?
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.
Where Do I Keep Track Of Expenses?
You can use a tracker like the one I have above.
You can go old school and keep a small notebook and pen with you to write down everything you spend.
If you want something more convenient, you can track in the notes section of your phone. Just add the date and start typing.
Or, even more high tech, find an app. There are so many that will allow you to track your expenses and this could be the perfect solution when you are budgeting as a beginner!
I would suggest tracking as you go through your day and not trying to remember everything at the end of the day. Don’t leave it all until the end when there is a chance you just won’t remember it all.
What Is Included?
Writing down everything that you spend your money on every day is a HUGE part of tracking your spending when you are budgeting as a beginner, but don’t forget your once a month expenses as well.
Write down your bills as you pay them, also.
Cable, phone, mortgage, car insurance, credit cards all need to be tracked as well. These are things that you pay and will have a place once we get down to the nitty-gritty budget.
What Did Tracking Your Spending Tell You?
As your first assignment budgeting as a beginner, what did you discover?
Were there surprises? Or did you know you spent that much on food each month?
This is an excellent exercise in knowing how much you spend (or overspend) each month.
Keeping track of expenses and looking over your data will show you unnecessary spending and allow you to examine which things you can decide are unnecessary.
Tracking your expenses as a beginner will also call attention to any fees that you might have built up. Costs for things you might be able to eliminate like memberships that you no longer use.
Bad Spending Habit Examples
As you track 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 that 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 $5latte that then costs you $35 because of those fees. Hope it was the best latte you have ever had!!
After You Track Your Spending, Budget.
Now that you have compiled all of the things you spend your money on, you can create a budget. You have enough information to make an educated guess on how much each category should have in it.
Remember, this will take you about 90 days to work out. There will be kinks and mess ups but don’t give up. You will get it.
With all of this information, you can find the holes in your spending and plug them. It will make it easier to assign a dollar amount to the budget.
This is also a way to see how much you are spending on bills like phone, electricity, and water. And it will show you that there will be room to save money on those utility bills also
You will find a sense of peace and power in knowing where your money is going. Even though it’s such a massive undertaking, there is a light at the end of the tunnel.
Knowledge is power. Budgeting for beginners has just been made more clear and more comfortable than you ever thought possible!